Here's Why Bharat Forge (NSE:BHARATFORG) Has Caught The Eye Of Investors

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.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Bharat Forge (NSE:BHARATFORG). 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Fast Is Bharat Forge Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. It's good to see that Bharat Forge's EPS has grown from ₹20.34 to ₹22.54 over twelve months. There's little doubt shareholders would be happy with that 11% gain.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While Bharat Forge may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Check out our latest analysis for Bharat Forge

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

Are Bharat Forge Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹664b company like Bharat Forge. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they hold ₹2.3b worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Bharat Forge Worth Keeping An Eye On?

As previously touched on, Bharat Forge is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Even so, be aware that Bharat Forge is showing 2 warning signs in our investment analysis , you should know about...

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.