If You Like EPS Growth Then Check Out TVS Motor (NSE:TVSMOTOR) Before It's Too Late

By
Simply Wall St
Published
August 12, 2021
NSEI:TVSMOTOR
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like TVS Motor (NSE:TVSMOTOR). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for TVS Motor

How Fast Is TVS Motor Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. TVS Motor managed to grow EPS by 4.6% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

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. TVS Motor maintained stable EBIT margins over the last year, all while growing revenue 41% to ₹222b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
NSEI:TVSMOTOR Earnings and Revenue History August 13th 2021

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check TVS Motor's balance sheet strength, before getting too excited.

Are TVS Motor Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own TVS Motor shares worth a considerable sum. To be specific, they have ₹2.2b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is TVS Motor Worth Keeping An Eye On?

As I already mentioned, TVS Motor is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. You still need to take note of risks, for example - TVS Motor has 2 warning signs (and 1 which is potentially serious) we think you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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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