Should You Be Adding Titan (NSE:TITAN) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Titan (NSE:TITAN), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Titan

Titan's Improving Profits

Over the last three years, Titan has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. In previous twelve months, Titan's EPS has risen from ₹35.26 to ₹37.19. That's a fair increase of 5.5%.

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. It's noted that Titan's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Titan remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 28% to ₹465b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Titan's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Titan Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Titan top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the ₹15m that company insider Rajani Seshadri spent buying shares (at an average price of about ₹3,068). Purchases like this clue us in to the to the faith management has in the business' future.

On top of the insider buying, it's good to see that Titan insiders have a valuable investment in the business. We note that their impressive stake in the company is worth ₹157b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add Titan To Your Watchlist?

One important encouraging feature of Titan is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. We should say that we've discovered 1 warning sign for Titan that you should be aware of before investing here.

Keen growth investors love to see insider buying. Thankfully, Titan isn't the only one. You can see a a free list of them here.

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.