Here's Why We Think HPL Electric & Power (NSE:HPL) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like HPL Electric & Power (NSE:HPL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Fast Is HPL Electric & Power Growing Its Earnings Per Share?

HPL Electric & Power has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, HPL Electric & Power's EPS shot from ₹6.40 to ₹10.94, over the last year. It's not often a company can achieve year-on-year growth of 71%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. HPL Electric & Power maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹16b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Check out our latest analysis for HPL Electric & Power

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are HPL Electric & Power Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own HPL Electric & Power shares worth a considerable sum. With a whopping ₹6.5b worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 23% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like HPL Electric & Power with market caps between ₹17b and ₹68b is about ₹24m.

HPL Electric & Power offered total compensation worth ₹16m to its CEO in the year to March 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does HPL Electric & Power Deserve A Spot On Your Watchlist?

HPL Electric & Power's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. HPL Electric & Power certainly ticks a few boxes, so we think it's probably well worth further consideration. Even so, be aware that HPL Electric & Power is showing 1 warning sign in our investment analysis , you should know about...

Although HPL Electric & Power certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.