Here’s Why We Think Repco Home Finance (NSE:REPCOHOME) Might Deserve Your Attention Today

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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Repco Home Finance (NSE:REPCOHOME). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.

See our latest analysis for Repco Home Finance

Repco Home Finance’s Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Repco Home Finance grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Our analysis has highlighted that Repco Home Finance’s revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Repco Home Finance remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to ₹6.8b. That’s a real positive.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NSEI:REPCOHOME Earnings and Revenue History June 11th 2024

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for Repco Home Finance’s future EPS 100% free.

Are Repco Home Finance Insiders Aligned With All Shareholders?

It’s a good habit to check into a company’s remuneration policies to ensure that the CEO and management team aren’t putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Repco Home Finance, with market caps between ₹17b and ₹67b, is around ₹24m.

The CEO of Repco Home Finance only received ₹5.3m in total compensation for the year ending March 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it’s reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Repco Home Finance Deserve A Spot On Your Watchlist?

As previously touched on, Repco Home Finance is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So all in all Repco Home Finance is worthy at least considering for your watchlist. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Repco Home Finance (at least 1 which is significant) , and understanding these should be part of your investment process.

There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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

Valuation is complex, but we’re helping make it simple.

Find out whether Repco Home Finance is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.

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