Does ICICI Lombard General Insurance (NSE:ICICIGI) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like ICICI Lombard General Insurance (NSE:ICICIGI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ICICI Lombard General Insurance with the means to add long-term value to shareholders.

View our latest analysis for ICICI Lombard General Insurance

How Quickly Is ICICI Lombard General Insurance Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, ICICI Lombard General Insurance has grown EPS by 6.3% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Our analysis has highlighted that ICICI Lombard General Insurance'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. ICICI Lombard General Insurance maintained stable EBIT margins over the last year, all while growing revenue 14% to ₹206b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed 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 ICICI Lombard General Insurance's future EPS 100% free.

Are ICICI Lombard General Insurance Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹798b company like ICICI Lombard General Insurance. But we do take comfort from the fact that they are investors in the company. Indeed, they hold ₹2.9b worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to ICICI Lombard General Insurance, with market caps over ₹664b, is around ₹79m.

ICICI Lombard General Insurance's CEO took home a total compensation package worth ₹42m in the year leading up to March 2023. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is ICICI Lombard General Insurance Worth Keeping An Eye On?

One positive for ICICI Lombard General Insurance is that it is growing EPS. That's nice to see. Earnings growth might be the main attraction for ICICI Lombard General Insurance, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. You still need to take note of risks, for example - ICICI Lombard General Insurance has 1 warning sign we think you should be aware of.

Although ICICI Lombard General Insurance certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.