Here's Why General Insurance Corporation of India (NSE:GICRE) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like General Insurance Corporation of India (NSE:GICRE), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for General Insurance Corporation of India

General Insurance Corporation of India's Improving Profits

Over the last three years, General Insurance Corporation of India has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, General Insurance Corporation of India's EPS grew from ₹23.69 to ₹40.79, over the previous 12 months. It's not often a company can achieve year-on-year growth of 72%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that, last year, General Insurance Corporation of India's revenue from operations was lower than its revenue, so that could distort our analysis of its margins. Unfortunately, General Insurance Corporation of India's revenue dropped 7.7% last year, but the silver lining is that EBIT margins improved from 11% to 17%. While not disastrous, these figures could be better.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for General Insurance Corporation of India's future EPS 100% free.

Are General Insurance Corporation of India Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to General Insurance Corporation of India, with market caps between ₹166b and ₹531b, is around ₹49m.

The CEO of General Insurance Corporation of India was paid just ₹2.5m in total compensation for the year ending March 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.

Does General Insurance Corporation of India Deserve A Spot On Your Watchlist?

General Insurance Corporation of India's earnings have taken off in quite an impressive fashion. Such fast EPS growth prompts the question: has the business reached an inflection point? At the same time the reasonable CEO compensation reflects well on the board of directors. It will definitely require further research to be sure, but it does seem that General Insurance Corporation of India has the hallmarks of a quality business; and that would make it well worth watching. Before you take the next step you should know about the 2 warning signs for General Insurance Corporation of India (1 shouldn't be ignored!) that we have uncovered.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

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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.