Does Lloyds Metals and Energy (NSE:LLOYDSME) Deserve A Spot On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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

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How Fast Is Lloyds Metals and Energy Growing Its Earnings Per Share?

Over the last three years, Lloyds Metals and Energy 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. It's good to see that Lloyds Metals and Energy's EPS has grown from ₹25.11 to ₹29.15 over twelve months. There's little doubt shareholders would be happy with that 16% gain.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Lloyds Metals and Energy is growing revenues, and EBIT margins improved by 4.7 percentage points to 29%, over the last year. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Lloyds Metals and Energy

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 Lloyds Metals and Energy's future EPS 100% free.

Are Lloyds Metals and Energy Insiders Aligned With All Shareholders?

Since Lloyds Metals and Energy has a market capitalisation of ₹673b, 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 considerable amount of wealth invested in it, currently valued at ₹56b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between ₹342b and ₹1.0t, like Lloyds Metals and Energy, the median CEO pay is around ₹65m.

The CEO of Lloyds Metals and Energy only received ₹9.7m in total compensation for the year ending March 2024. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Lloyds Metals and Energy Worth Keeping An Eye On?

One important encouraging feature of Lloyds Metals and Energy is that it is growing profits. The fact that EPS is growing is a genuine positive for Lloyds Metals and Energy, but the pleasant picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. If you think Lloyds Metals and Energy might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Lloyds Metals and Energy certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.