Here's Why I Think Motilal Oswal Financial Services (NSE:MOTILALOFS) Might Deserve Your Attention Today

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Motilal Oswal Financial Services (NSE:MOTILALOFS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Motilal Oswal Financial Services

How Quickly Is Motilal Oswal Financial Services Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. It certainly is nice to see that Motilal Oswal Financial Services has managed to grow EPS by 36% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. Not all of Motilal Oswal Financial Services's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Motilal Oswal Financial Services's EBIT margins were flat over the last year, revenue grew by a solid 68% to ₹34b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Motilal Oswal Financial Services?

Are Motilal Oswal Financial Services Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that, in the last year, insiders sold -₹16m worth of shares. But that's far less than the ₹189m insiders spend purchasing stock. This makes me even more interested in Motilal Oswal Financial Services because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Co-Founder Motilal Oswal who made the biggest single purchase, worth ₹64m, paying ₹611 per share.

Along with the insider buying, another encouraging sign for Motilal Oswal Financial Services is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at ₹26b. That equates to 20% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Motilal Oswal is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Motilal Oswal Financial Services with market caps between ₹75b and ₹239b is about ₹32m.

Motilal Oswal Financial Services offered total compensation worth ₹24m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Motilal Oswal Financial Services To Your Watchlist?

You can't deny that Motilal Oswal Financial Services has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 4 warning signs for Motilal Oswal Financial Services (2 don't sit too well with us!) that you need to be mindful of.

The good news is that Motilal Oswal Financial Services is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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