Here's Why We Think Mazagon Dock Shipbuilders (NSE:MAZDOCK) Might Deserve Your Attention 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.

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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mazagon Dock Shipbuilders with the means to add long-term value to shareholders.

View our latest analysis for Mazagon Dock Shipbuilders

How Quickly Is Mazagon Dock Shipbuilders Increasing Earnings Per Share?

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 makes EPS growth an attractive quality for any company. Impressively, Mazagon Dock Shipbuilders has grown EPS by 29% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Mazagon Dock Shipbuilders shareholders can take confidence from the fact that EBIT margins are up from 6.1% to 8.4%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Mazagon Dock Shipbuilders.

Are Mazagon Dock Shipbuilders 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. Shareholders will be pleased by the fact that insiders own Mazagon Dock Shipbuilders shares worth a considerable sum. As a matter of fact, their holding is valued at ₹1.7b. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between ₹83b and ₹264b, like Mazagon Dock Shipbuilders, the median CEO pay is around ₹46m.

The CEO of Mazagon Dock Shipbuilders was paid just ₹4.7m in total compensation for the year ending March 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. 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 you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Mazagon Dock Shipbuilders is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Mazagon Dock Shipbuilders that you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.