Here's Why Titagarh Rail Systems (NSE:TITAGARH) Has Caught The Eye Of Investors

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Titagarh Rail Systems (NSE:TITAGARH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Titagarh Rail Systems with the means to add long-term value to shareholders.

See our latest analysis for Titagarh Rail Systems

How Fast Is Titagarh Rail Systems Growing Its Earnings Per Share?

Titagarh Rail Systems has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Titagarh Rail Systems' EPS shot up from ₹17.46 to ₹22.59; a result that's bound to keep shareholders happy. That's a fantastic gain of 29%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Titagarh Rail Systems maintained stable EBIT margins over the last year, all while growing revenue 11% to ₹40b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 Titagarh Rail Systems?

Are Titagarh Rail Systems 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 Titagarh Rail Systems shares worth a considerable sum. Notably, they have an enviable stake in the company, worth ₹34b. This totals to 22% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

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. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Titagarh Rail Systems with market caps between ₹84b and ₹270b is about ₹41m.

Titagarh Rail Systems offered total compensation worth ₹36m to its CEO in the year to March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Titagarh Rail Systems Deserve A Spot On Your Watchlist?

You can't deny that Titagarh Rail Systems has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Titagarh Rail Systems has underlying strengths that make it worth a look at. What about risks? Every company has them, and we've spotted 2 warning signs for Titagarh Rail Systems (of which 1 is potentially serious!) you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.