Is Now The Time To Put Bajaj Finserv (NSE:BAJAJFINSV) On Your Watchlist?

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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Bajaj Finserv (NSE:BAJAJFINSV). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Bajaj Finserv

How Fast Is Bajaj Finserv Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Bajaj Finserv's EPS has grown 26% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Our analysis has highlighted that Bajaj Finserv'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. While we note Bajaj Finserv achieved similar EBIT margins to last year, revenue grew by a solid 33% to ₹1.2t. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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 Bajaj Finserv.

Are Bajaj Finserv Insiders Aligned With All Shareholders?

Since Bajaj Finserv has a market capitalisation of ₹2.6t, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth ₹67b. 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 Bajaj Finserv To Your Watchlist?

You can't deny that Bajaj Finserv has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. 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. We don't want to rain on the parade too much, but we did also find 3 warning signs for Bajaj Finserv (2 are significant!) that you need to be mindful of.

Although Bajaj Finserv 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.