With EPS Growth And More, Mahindra CIE Automotive (NSE:MAHINDCIE) Makes An Interesting Case

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. 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 CIE Automotive (NSE:MAHINDCIE), 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 CIE Automotive with the means to add long-term value to shareholders.

Check out our latest analysis for Mahindra CIE Automotive

How Fast Is Mahindra CIE Automotive Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. Outstandingly, Mahindra CIE Automotive's EPS shot from ₹8.42 to ₹15.74, over the last year. It's a rarity to see 87% year-on-year growth like that.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Mahindra CIE Automotive's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Mahindra CIE Automotive achieved similar EBIT margins to last year, revenue grew by a solid 20% to ₹94b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Mahindra CIE Automotive'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 CIE Automotive Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Mahindra CIE Automotive shares worth a considerable sum. To be specific, they have ₹2.8b worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between ₹80b and ₹255b, like Mahindra CIE Automotive, the median CEO pay is around ₹47m.

The Mahindra CIE Automotive CEO received total compensation of only ₹2.0m in the year to December 2021. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Mahindra CIE Automotive To Your Watchlist?

Mahindra CIE Automotive's earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Mahindra CIE Automotive is certainly doing some things right and is well worth investigating. Before you take the next step you should know about the 2 warning signs for Mahindra CIE Automotive that we have uncovered.

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.