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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 Cholamandalam Investment and Finance (NSE:CHOLAFIN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cholamandalam Investment and Finance with the means to add long-term value to shareholders.

See our latest analysis for Cholamandalam Investment and Finance

How Fast Is Cholamandalam Investment and Finance Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Cholamandalam Investment and Finance has grown EPS by 36% 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.

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 Cholamandalam Investment and Finance'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. Cholamandalam Investment and Finance maintained stable EBIT margins over the last year, all while growing revenue 40% to ₹93b. That's encouraging news for the company!

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cholamandalam Investment and Finance's forecast profits?

Are Cholamandalam Investment and Finance Insiders Aligned With All Shareholders?

Since Cholamandalam Investment and Finance has a market capitalisation of ₹1.3t, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹17b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Cholamandalam Investment and Finance, with market caps over ₹672b, is about ₹93m.

Cholamandalam Investment and Finance's CEO took home a total compensation package of ₹43m in the year prior to March 2024. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is Cholamandalam Investment and Finance Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Cholamandalam Investment and Finance's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Cholamandalam Investment and Finance has underlying strengths that make it worth a look at. We should say that we've discovered 1 warning sign for Cholamandalam Investment and Finance that you should be aware of before investing here.

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.

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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.