Do State Bank of India's (NSE:SBIN) Earnings Warrant Your Attention?

By
Simply Wall St
Published
February 11, 2021
NSEI:SBIN
Source: Shutterstock

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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in State Bank of India (NSE:SBIN). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for State Bank of India

How Fast Is State Bank of India Growing Its Earnings Per Share?

Over the last three years, State Bank of India has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, State Bank of India's EPS soared from ₹15.89 to ₹25.99, over the last year. That's a impressive gain of 64%.

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. I note that State Bank of India's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note State Bank of India's EBIT margins were flat over the last year, revenue grew by a solid 6.8% to ₹1.6t. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NSEI:SBIN Earnings and Revenue History February 12th 2021

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for State Bank of India?

Are State Bank of India Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalizations over ₹583b, like State Bank of India, the median CEO pay is around ₹73m.

The State Bank of India CEO received total compensation of only ₹2.0m in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is State Bank of India Worth Keeping An Eye On?

For growth investors like me, State Bank of India's raw rate of earnings growth is a beacon in the night. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So I'd venture it may well deserve a spot on your watchlist, or even a little further research. What about risks? Every company has them, and we've spotted 1 warning sign for State Bank of India you should know about.

You can invest in 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. 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.
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