Here's Why We Think Bajaj Auto (NSE:BAJAJ-AUTO) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Bajaj Auto (NSE:BAJAJ-AUTO). 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.

View our latest analysis for Bajaj Auto

How Quickly Is Bajaj Auto Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Bajaj Auto's EPS has grown 17% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Bajaj Auto'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. While we note Bajaj Auto achieved similar EBIT margins to last year, revenue grew by a solid 18% to ₹433b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. 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 Bajaj Auto's future EPS 100% free.

Are Bajaj Auto Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The ₹606m worth of shares that insiders sold during the last 12 months pales in comparison to the ₹4.8b they spent on acquiring shares in the company. This adds to the interest in Bajaj Auto because it suggests that those who understand the company best, are optimistic. We also note that it was the Non-Executive Director, Sanjivnayan Bajaj, who made the biggest single acquisition, paying ₹1.9b for shares at about ₹4,597 each.

The good news, alongside the insider buying, for Bajaj Auto bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth ₹71b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Bajaj Auto Deserve A Spot On Your Watchlist?

For growth investors, Bajaj Auto's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. Even so, be aware that Bajaj Auto is showing 1 warning sign in our investment analysis , you should know about...

The good news is that Bajaj Auto is not the only growth stock with insider buying. Here's a list of growth-focused companies in IN with insider buying in the last three months!

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.