Is Now The Time To Put Samvardhana Motherson International (NSE:MOTHERSON) On Your Watchlist?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Samvardhana Motherson International (NSE:MOTHERSON). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Samvardhana Motherson International with the means to add long-term value to shareholders.

See our latest analysis for Samvardhana Motherson International

How Quickly Is Samvardhana Motherson International Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Samvardhana Motherson International managed to grow EPS by 8.9% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. EBIT margins for Samvardhana Motherson International remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 24% to ₹787b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are Samvardhana Motherson International Insiders Aligned With All Shareholders?

Owing to the size of Samvardhana Motherson International, we wouldn't expect insiders to hold a significant proportion of the company. 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. We note that their impressive stake in the company is worth ₹82b. Coming in at 14% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between ₹328b and ₹983b, like Samvardhana Motherson International, the median CEO pay is around ₹65m.

Samvardhana Motherson International offered total compensation worth ₹33m to its CEO in the year to March 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Samvardhana Motherson International To Your Watchlist?

As previously touched on, Samvardhana Motherson International is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Samvardhana Motherson International, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We don't want to rain on the parade too much, but we did also find 1 warning sign for Samvardhana Motherson International that you need to be mindful of.

Although Samvardhana Motherson International certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.