With EPS Growth And More, ExlService Holdings (NASDAQ:EXLS) Is Interesting

Simply Wall St
·3 min read

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like ExlService Holdings (NASDAQ:EXLS), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for ExlService Holdings

ExlService Holdings's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud ExlService Holdings's stratospheric annual EPS growth of 41%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. ExlService Holdings shareholders can take confidence from the fact that EBIT margins are up from 9.9% to 15%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
earnings-and-revenue-history

Fortunately, we've got access to analyst forecasts of ExlService Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are ExlService Holdings Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own ExlService Holdings shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$113m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does ExlService Holdings Deserve A Spot On Your Watchlist?

ExlService Holdings's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind ExlService Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because ExlService Holdings is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Although ExlService Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

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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.