With EPS Growth And More, Apollo Tyres (NSE:APOLLOTYRE) Makes An Interesting Case

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Apollo Tyres (NSE:APOLLOTYRE). 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.

Check out our latest analysis for Apollo Tyres

How Fast Is Apollo Tyres Growing Its Earnings Per Share?

Apollo Tyres 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. Thus, it makes sense to focus on more recent growth rates, instead. Apollo Tyres' EPS skyrocketed from ₹17.39 to ₹27.11, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 56%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Apollo Tyres is growing revenues, and EBIT margins improved by 3.8 percentage points to 12%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

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 Apollo Tyres' future EPS 100% free.

Are Apollo Tyres Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Apollo Tyres followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at ₹8.0b, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Is Apollo Tyres Worth Keeping An Eye On?

For growth investors, Apollo Tyres' raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Apollo Tyres is trading on a high P/E or a low P/E, relative to its industry.

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.

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.