Does Mahindra & Mahindra (NSE:M&M) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Mahindra & Mahindra (NSE:M&M). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mahindra & Mahindra with the means to add long-term value to shareholders.

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How Fast Is Mahindra & Mahindra 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. Shareholders will be happy to know that Mahindra & Mahindra's EPS has grown 18% 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.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Mahindra & Mahindra's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Mahindra & Mahindra maintained stable EBIT margins over the last year, all while growing revenue 18% to ₹1.7t. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Check out our latest analysis for Mahindra & Mahindra

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 Mahindra & Mahindra's future EPS 100% free.

Are Mahindra & Mahindra Insiders Aligned With All Shareholders?

Since Mahindra & Mahindra has a market capitalisation of ₹4.0t, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth ₹38b. While that is a lot of skin in the game, we note this holding only totals to 0.9% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Is Mahindra & Mahindra Worth Keeping An Eye On?

You can't deny that Mahindra & Mahindra has grown its earnings per share at a very impressive rate. That's attractive. 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. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Mahindra & Mahindra (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.