With EPS Growth And More, Force Motors (NSE:FORCEMOT) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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

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How Fast Is Force Motors Growing Its Earnings Per Share?

Over the last three years, Force Motors has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Force Motors' EPS shot from ₹295 to ₹608, over the last year. Year on year growth of 106% is certainly a sight to behold.

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. EBIT margins for Force Motors remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to ₹81b. That's a real positive.

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.

See our latest analysis for Force Motors

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 Force Motors' balance sheet strength, before getting too excited.

Are Force Motors Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Force Motors insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth ₹11b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add Force Motors To Your Watchlist?

Force Motors' earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Force Motors is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 3 warning signs for Force Motors you should know about.

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 tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.