However, companies that can consistently compound returns over the long term tend to share a few core traits: expanding margins, steady revenue growth, and, most importantly, strong profit growth.
It all starts with revenue. If a company is growing its top line, the next thing to watch is whether that growth translates into meaningful profits, ideally supported by improving margins.
Profit growth stands out as the most critical. That’s because stock prices eventually follow earnings. A company’s market value is essentially its profit multiplied by the price-to-earnings ratio.
We have selected stocks that reported more than 500% profit growth in Q4 FY25.
#1 Bharti Airtel
Airtel is India’s second-largest telecommunication company, after Reliance Jio, with 362 million subscribers. Its 5G user base is 135 million, while home broadband user currently stands at 46 million.
The company’s revenue grew 27% to ₹47,880 crore in the fourth quarter of FY25. The growth was driven by higher average revenue per user (Arpu), which rose to ₹245 from ₹209 in Q4FY24.
Earnings before interest, tax, and depreciation (Ebitda) margin increased to 56.4%, as economies of scale kicked in. As a result, net profit rose 503% from last year to ₹12,480 crore.
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Looking ahead, the company is expected to hike tariff charges further, increasing Arpu. The management has said that Arpu in India is still among the lowest globally and more tariff hikes are required to ensure financial stability.
Airtel is also prioritizing investments in home broadband and data centers. It plans to double its data center capacity to 400 megawatts in three years.
It aims to balance its priorities, such as deleveraging the balance sheet, increasing dividends, and bolstering business-to-business adjacencies. The company has regulatory dues of ₹92,000 crore.
#2 Zee Entertainment
Zee Entertainment is one of the largest global content companies connecting 1 billion people. The company operates 50 channels in 11 Indian languages, reaching over 859 million viewers nationwide and has a 16.8% television network share.
The company’s fourth quarter sales remained flat at ₹2180 crore. Advertising revenue accounts for 38% of total revenue, subscription revenue 45%, and the rest comes from other services. However, cost optimization led to an expansion in margins.
This, along with a fall in depreciation and exceptional expenses, led to a 1,346% jump in net profit to ₹190 crore.
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Looking ahead, Zee plans to allocate 40% of its free cash flow to strengthen its regional content, music, digital platforms, and international expansion.
It also expands its content distribution through free-to-air television, connected television, and fast channels.
The company has partnered with telecom providers to boost the reach and monetisation of Zee5. It’s also looking to unlock value through music and syndication.
The company aims to grow revenue from advertisement by 8-10%, achieve Ebitda margins of 18-20%, and a free cash flow to net profit ratio of over 1.2 times.
It also plans to double advertising contributions by FY28 and reward shareholders by setting aside 25-30% of net profit for dividends.
Dilip Buildcon is India’s leading engineering, procurement, and construction contractor. The company constructs roads, bridges, highways, mines, irrigation systems, metro, and airports.
Dilip Buildco’s revenue rose 8% to ₹2,320 crore. However, the margin doubled to about 21%, leading to a massive 9,133% jump in net profit to ₹280 crore.
Looking ahead, the company order stands at ₹14,900 crore, just 1.3 times its FY25 revenue of ₹11,300 crore. The order book is diversified, with 21% coming from roads, irrigation (21%), mining (24%), and water (6%).
However, the low order book to revenue ratio implies the company can face an earnings slowdown soon.
The company forecasts consolidated revenue growth of 10-15% and operating margins of 10-11% in FY26. The management has indicated a slowdown in ordering in the near future and estimates order inflows between ₹15,000-20,000 crore.
#4 Dhanlaxmi Bank
Dhanlaxmi Bank has an operational track record of over 97 years. It has a strong franchise in South India.
The bank has a network of 261 branches, with more than 80% across the region in Tamil Nadu, Andhra Pradesh, Telangana, Kerala, and Karnataka. Its operating income increased by 14.5% to ₹350 crore driven by a 28% rise in net interest income and a fall in the cost-to-income ratio. The net interest margin also increased to 3.46%.
The net profit grew massive 867% due to an over 50% fall in tax expense. As a result, the bank return on assets also grew to 0.41%.
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The company gross non-performing assets (NPA) declined to 2.98%, from 4.05% last year. The net NPA too declined to 0.99%, from 1.25%.
#5 Paradeep Phosphates
Paradeep Phosphates is one of the largest manufacturers of di-ammonium phosphate (DAP) and nitrogen-phosphorus-potassium (NPK) fertilisers in the country.
It has a production capacity of 2.6 million metric tonnes per annum (MMTPA). Through its two manufacturing plants located in Odisha and Goa, PPL reaches over 9.5 million farmers across 15 states.
The company’s revenue grew 56% to ₹3,490 crore, led by strong sales volumes. Total fertilizer sales grew 47%, N-20 sales grew 61% and other NPK sales grew 73%.
The company’s Ebitda margin increased to 11%. This led to a sharp 627% jump in net profit to ₹160 crore.
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Looking ahead, the company expects to benefit from the ₹37,200 crore budget allocated for phosphatic fertilizer subsidy.
The company is also witnessing strong industry-wide growth in NP/NPK production (up 18.7%) and sales (up 28.4%). The company aims to increase market share amid a strong demand scenario.
To meet the demand, the company plans to increase phosphoric acid capacity to 0.7 million and sulphuric acid capacity to 2 million tonnes from 1.4 million.
It’s also making capital expenditure to improve energy efficiency at its urea plant, which is expected to reduce energy consumption.
These initiatives are expected to improve the company’s cost structure and margins, aiding to the overall profit generation.
Conclusion
Profit growth is one of the key metrics used to identify companies with strong fundamentals and the potential to generate outsized returns.
Since the profit growth of these firms has been on a low base, it would be challenging for them to maintain the earnings growth rate.
That’s why it is crucial to assess the company’s fundamentals, including its financial performance, corporate governance practices, and growth prospects, rather than relying solely on the hype.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not
be treated as such.
This article is syndicated from Equitymaster.com