Is Now The Time To Put Aditya Birla Capital (NSE:ABCAPITAL) On Your Watchlist?

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.

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 Aditya Birla Capital (NSE:ABCAPITAL). 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.

Check out our latest analysis for Aditya Birla Capital

Aditya Birla Capital's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Aditya Birla Capital's EPS has grown 28% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Our analysis has highlighted that Aditya Birla Capital's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Aditya Birla Capital remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to ₹292b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 Aditya Birla Capital's future EPS 100% free.

Are Aditya Birla Capital 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. So it is good to see that Aditya Birla Capital insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹1.2b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Aditya Birla Capital To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Aditya Birla Capital's strong EPS growth. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. We should say that we've discovered 1 warning sign for Aditya Birla Capital that you should be aware of before investing here.

Although Aditya Birla Capital certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.