Here's Why We Think Tamilnad Mercantile Bank (NSE:TMB) 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. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Tamilnad Mercantile Bank (NSE:TMB). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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Tamilnad Mercantile Bank's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Tamilnad Mercantile Bank has grown EPS by 5.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Our analysis has highlighted that Tamilnad Mercantile Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Tamilnad Mercantile Bank achieved similar EBIT margins to last year, revenue grew by a solid 7.7% to ₹31b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Tamilnad Mercantile Bank

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 Tamilnad Mercantile Bank's balance sheet strength, before getting too excited.

Are Tamilnad Mercantile Bank Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Tamilnad Mercantile Bank followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Holding ₹7.2b worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 9.1% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Tamilnad Mercantile Bank with market caps between ₹35b and ₹142b is about ₹35m.

The CEO of Tamilnad Mercantile Bank only received ₹7.8m in total compensation for the year ending March 2025. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Tamilnad Mercantile Bank To Your Watchlist?

As previously touched on, Tamilnad Mercantile Bank is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Tamilnad Mercantile Bank, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. If you think Tamilnad Mercantile Bank might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Tamilnad Mercantile Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.