Does Mahindra & Mahindra Financial Services (NSE:M&MFIN) Deserve A Spot 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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Mahindra & Mahindra Financial Services (NSE:M&MFIN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mahindra & Mahindra Financial Services with the means to add long-term value to shareholders.

View our latest analysis for Mahindra & Mahindra Financial Services

Mahindra & Mahindra Financial Services' Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Mahindra & Mahindra Financial Services' EPS has grown 26% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Not all of Mahindra & Mahindra Financial Services' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Mahindra & Mahindra Financial Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to ₹76b. That's a real positive.

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

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 Mahindra & Mahindra Financial Services' future profits.

Are Mahindra & Mahindra Financial Services 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. Mahindra & Mahindra Financial Services followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at ₹4.8b, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

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. For companies with market capitalisations between ₹173b and ₹554b, like Mahindra & Mahindra Financial Services, the median CEO pay is around ₹52m.

Mahindra & Mahindra Financial Services' CEO took home a total compensation package worth ₹39m in the year leading up to March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Mahindra & Mahindra Financial Services Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Mahindra & Mahindra Financial Services' 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. Everyone has their own preferences when it comes to investing but it definitely makes Mahindra & Mahindra Financial Services look rather interesting indeed. You should always think about risks though. Case in point, we've spotted 2 warning signs for Mahindra & Mahindra Financial Services you should be aware of, and 1 of them is a bit concerning.

Although Mahindra & Mahindra Financial Services 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.