Stock Analysis

If You Like EPS Growth Then Check Out JSW Steel (NSE:JSWSTEEL) Before It's Too Late

NSEI:JSWSTEEL
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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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in JSW Steel (NSE:JSWSTEEL). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for JSW Steel

JSW Steel's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. As a tree reaches steadily for the sky, JSW Steel's EPS has grown 29% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. The good news is that JSW Steel is growing revenues, and EBIT margins improved by 16.2 percentage points to 27%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NSEI:JSWSTEEL Earnings and Revenue History November 9th 2021

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 JSW Steel's future profits.

Are JSW Steel Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹1.6t company like JSW Steel. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at ₹27b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does JSW Steel Deserve A Spot On Your Watchlist?

For growth investors like me, JSW Steel's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. We don't want to rain on the parade too much, but we did also find 3 warning signs for JSW Steel (1 doesn't sit too well with us!) that you need to be mindful of.

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.

Valuation is complex, but we're helping make it simple.

Find out whether JSW Steel is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

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