Here's Why I Think ICICI Lombard General Insurance (NSE:ICICIGI) Is An Interesting Stock

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 ICICI Lombard General Insurance (NSE:ICICIGI). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for ICICI Lombard General Insurance

How Fast Is ICICI Lombard General Insurance Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, ICICI Lombard General Insurance has grown EPS by 19% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that ICICI Lombard General Insurance's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note ICICI Lombard General Insurance's EBIT margins were flat over the last year, revenue grew by a solid 8.0% to ₹117b. That's progress.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of ICICI Lombard General Insurance's forecast profits?

Are ICICI Lombard General Insurance Insiders Aligned With All Shareholders?

Since ICICI Lombard General Insurance has a market capitalization of ₹665b, 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. Indeed, they have a glittering mountain of wealth invested in it, currently valued at ₹8.1b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is ICICI Lombard General Insurance Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about ICICI Lombard General Insurance's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Before you take the next step you should know about the 1 warning sign for ICICI Lombard General Insurance that we have uncovered.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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. 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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