Should You Be Adding Larsen & Toubro (NSE:LT) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Larsen & Toubro (NSE:LT). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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Larsen & Toubro'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. Impressively, Larsen & Toubro has grown EPS by 20% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. 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. Larsen & Toubro maintained stable EBIT margins over the last year, all while growing revenue 16% to ₹2.7t. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

View our latest analysis for Larsen & Toubro

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Larsen & Toubro's future profits.

Are Larsen & Toubro Insiders Aligned With All Shareholders?

Owing to the size of Larsen & Toubro, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Given insiders own a significant chunk of shares, currently valued at ₹5.0b, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Should You Add Larsen & Toubro To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Larsen & Toubro's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. We don't want to rain on the parade too much, but we did also find 2 warning signs for Larsen & Toubro (1 can't be ignored!) that you need to be mindful of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.