Should You Be Adding Nippon Life India Asset Management (NSE:NAM-INDIA) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 Nippon Life India Asset Management (NSE:NAM-INDIA). 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.

See our latest analysis for Nippon Life India Asset Management

Nippon Life India Asset Management's 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 Nippon Life India Asset Management's EPS has grown 19% 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. It's noted that Nippon Life India Asset Management's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Nippon Life India Asset Management shareholders can take confidence from the fact that EBIT margins are up from 64% to 68%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

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 Nippon Life India Asset Management's future profits.

Are Nippon Life India Asset Management Insiders Aligned With All Shareholders?

Since Nippon Life India Asset Management has a market capitalisation of ₹435b, 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. As a matter of fact, their holding is valued at ₹2.3b. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Nippon Life India Asset Management Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Nippon Life India Asset Management's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Nippon Life India Asset Management's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Nippon Life India Asset Management , and understanding it should be part of your investment process.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.