Here's Why We Think Asian Paints (NSE:ASIANPAINT) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Asian Paints (NSE:ASIANPAINT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Asian Paints with the means to add long-term value to shareholders.

See our latest analysis for Asian Paints

How Quickly Is Asian Paints 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Asian Paints has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Asian Paints maintained stable EBIT margins over the last year, all while growing revenue 21% to ₹335b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Asian Paints' forecast profits?

Are Asian Paints Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹2.7t company like Asian Paints. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth ₹207b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Asian Paints Deserve A Spot On Your Watchlist?

As previously touched on, Asian Paints is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Of course, profit growth is one thing but it's even better if Asian Paints is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.

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 free list of them here.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.