If EPS Growth Is Important To You, Bajaj Auto (NSE:BAJAJ-AUTO) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

In contrast to all that, many investors prefer to focus on companies like Bajaj Auto (NSE:BAJAJ-AUTO), which has not only revenues, but also profits. 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 Bajaj Auto

Bajaj Auto's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Bajaj Auto grew its EPS by 13% per year. That's a pretty good rate, if the company can sustain it.

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. Not all of Bajaj Auto's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Bajaj Auto remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to ₹397b. That's a real positive.

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.

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

Are Bajaj Auto Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The ₹255m 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 bodes well for Bajaj Auto as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Non-Executive Director Sanjivnayan Bajaj who made the biggest single purchase, worth ₹1.9b, paying ₹4,597 per share.

On top of the insider buying, it's good to see that Bajaj Auto insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹40b. 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?

One important encouraging feature of Bajaj Auto is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. We don't want to rain on the parade too much, but we did also find 1 warning sign for Bajaj Auto that you need to be mindful of.

The good news is that Bajaj Auto is not the only growth stock with insider buying. Here's a list of them... 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.