We Ran A Stock Scan For Earnings Growth And Larsen & Toubro (NSE:LT) Passed With Ease

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Larsen & Toubro (NSE:LT), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Larsen & Toubro with the means to add long-term value to shareholders.

See our latest analysis for Larsen & Toubro

How Fast Is Larsen & Toubro Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Larsen & Toubro has grown EPS by 25% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Not all of Larsen & Toubro's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Larsen & Toubro maintained stable EBIT margins over the last year, all while growing revenue 20% to ₹2.2t. 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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Larsen & Toubro?

Are Larsen & Toubro Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹4.9t company like Larsen & Toubro. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth ₹8.7b. While that is a lot of skin in the game, we note this holding only totals to 0.2% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

Should You Add Larsen & Toubro To Your Watchlist?

You can't deny that Larsen & Toubro has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. 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 should say that we've discovered 2 warning signs for Larsen & Toubro that you should be aware of before investing here.

Although Larsen & Toubro certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.