Do Mazagon Dock Shipbuilders' (NSE:MAZDOCK) Earnings Warrant Your Attention?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Mazagon Dock Shipbuilders (NSE:MAZDOCK). 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.

Check out the opportunities and risks within the IN Aerospace & Defense industry.

Mazagon Dock Shipbuilders' Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Mazagon Dock Shipbuilders has managed to grow EPS by 22% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Mazagon Dock Shipbuilders shareholders can take confidence from the fact that EBIT margins are up from 4.2% to 7.4%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Mazagon Dock Shipbuilders' forecast profits?

Are Mazagon Dock Shipbuilders Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Mazagon Dock Shipbuilders insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at ₹2.0b. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

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. For companies with market capitalisations between ₹81b and ₹261b, like Mazagon Dock Shipbuilders, the median CEO pay is around ₹51m.

The Mazagon Dock Shipbuilders CEO received total compensation of just ₹5.6m in the year to March 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Mazagon Dock Shipbuilders Deserve A Spot On Your Watchlist?

For growth investors, Mazagon Dock Shipbuilders' raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the key takeaway is that Mazagon Dock Shipbuilders is worth keeping an eye on. Still, you should learn about the 2 warning signs we've spotted with Mazagon Dock Shipbuilders (including 1 which is a bit concerning).

Although Mazagon Dock Shipbuilders 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.