If EPS Growth Is Important To You, Cholamandalam Investment and Finance (NSE:CHOLAFIN) Presents An Opportunity

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. 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.

In contrast to all that, many investors prefer to focus on companies like Cholamandalam Investment and Finance (NSE:CHOLAFIN), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Cholamandalam Investment and Finance Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Cholamandalam Investment and Finance has grown EPS by 22% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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 Cholamandalam Investment and Finance'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 Cholamandalam Investment and Finance remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 22% to ₹114b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

See our latest analysis for Cholamandalam Investment and Finance

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Cholamandalam Investment and Finance's future profits.

Are Cholamandalam Investment and Finance Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹1.5t company like Cholamandalam Investment and Finance. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth ₹13b. We note that this amounts to 0.9% of the company, which may be small owing to the sheer size of Cholamandalam Investment and Finance but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

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. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Cholamandalam Investment and Finance, with market caps over ₹706b, is around ₹104m.

The Cholamandalam Investment and Finance CEO received ₹65m in compensation for the year ending March 2025. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Cholamandalam Investment and Finance Deserve A Spot On Your Watchlist?

For growth investors, Cholamandalam Investment and Finance's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Cholamandalam Investment and Finance look rather interesting indeed. We should say that we've discovered 1 warning sign for Cholamandalam Investment and Finance that you should be aware of before investing here.

Although Cholamandalam Investment and Finance 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.