Here's Why Mahindra & Mahindra (NSE:M&M) Has Caught The Eye Of Investors

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Mahindra & Mahindra (NSE:M&M), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Mahindra & Mahindra

How Quickly Is Mahindra & Mahindra Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Mahindra & Mahindra has achieved impressive annual EPS growth of 60%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. While we note Mahindra & Mahindra achieved similar EBIT margins to last year, revenue grew by a solid 22% to ₹1.3t. That's encouraging news for the company!

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.

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

Are Mahindra & Mahindra Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹1.8t company like Mahindra & Mahindra. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth ₹14b. While that is a lot of skin in the game, we note this holding only totals to 0.8% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

Is Mahindra & Mahindra Worth Keeping An Eye On?

Mahindra & Mahindra's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Mahindra & Mahindra is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we've discovered 3 warning signs for Mahindra & Mahindra (1 is concerning!) that you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.