If EPS Growth Is Important To You, Larsen & Toubro (NSE:LT) Presents An Opportunity

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 Larsen & Toubro (NSE:LT). 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.

See our latest analysis for Larsen & Toubro

How Fast Is Larsen & Toubro Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. In impressive fashion, Larsen & Toubro's EPS grew from ₹34.27 to ₹72.45, over the previous 12 months. It's not often a company can achieve year-on-year growth of 111%.

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. It's noted that Larsen & Toubro's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Larsen & Toubro remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to ₹1.8t. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Larsen & Toubro's future EPS 100% free.

Are Larsen & Toubro Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹3.0t company like Larsen & Toubro. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at ₹2.2b. This considerable investment should help drive long-term value in the business. Despite being just 0.07% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Larsen & Toubro To Your Watchlist?

Larsen & Toubro's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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 based on this quick analysis, we do think it's worth considering Larsen & Toubro for a spot on your watchlist. It is worth noting though that we have found 3 warning signs for Larsen & Toubro (1 shouldn't be ignored!) that you need to take into consideration.

Although Larsen & Toubro 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.