Here's Why Indian Hotels (NSE:INDHOTEL) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Indian Hotels (NSE:INDHOTEL). 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Indian Hotels' Improving Profits

In the last three years Indian Hotels' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Indian Hotels' EPS soared from ₹8.23 to ₹12.67, over the last year. That's a fantastic gain of 54%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Indian Hotels maintained stable EBIT margins over the last year, all while growing revenue 20% to ₹80b. That's encouraging news for the company!

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.

See our latest analysis for Indian Hotels

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Indian Hotels' future EPS 100% free.

Are Indian Hotels Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹1.1t company like Indian Hotels. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth ₹23b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Indian Hotels Deserve A Spot On Your Watchlist?

For growth investors, Indian Hotels' raw rate of earnings growth is a beacon in the night. 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. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Indian Hotels' ROE with industry peers (and the market at large) .

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.