Here's Why We Think Mahindra & Mahindra (NSE:M&M) 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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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. 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.

Check out our latest analysis for Mahindra & Mahindra

How Fast Is Mahindra & Mahindra Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Mahindra & Mahindra's EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. The music to the ears of Mahindra & Mahindra shareholders is that EBIT margins have grown from 12% to 15% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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?

Owing to the size of Mahindra & Mahindra, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth ₹14b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Should You Add Mahindra & Mahindra To Your Watchlist?

For growth investors, Mahindra & Mahindra's raw rate of earnings growth is a beacon in the night. 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. Still, you should learn about the 4 warning signs we've spotted with Mahindra & Mahindra (including 2 which are concerning).

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 free list of them here.

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.