Here's Why Lloyds Metals and Energy (NSE:LLOYDSME) Has Caught The Eye Of Investors

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 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.

View our latest analysis for Lloyds Metals and Energy

Lloyds Metals and Energy's Improving Profits

Lloyds Metals and Energy has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Lloyds Metals and Energy's EPS has risen over the last 12 months, growing from ₹23.75 to ₹28.06. That's a 18% gain; respectable growth in the broader scheme of things.

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. The good news is that Lloyds Metals and Energy is growing revenues, and EBIT margins improved by 2.1 percentage points to 27%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Lloyds Metals and Energy.

Are Lloyds Metals and Energy Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹759b company like Lloyds Metals and Energy. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹63b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Lloyds Metals and Energy with market caps between ₹345b and ₹1.0t is about ₹66m.

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. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Lloyds Metals and Energy Deserve A Spot On Your Watchlist?

As previously touched on, Lloyds Metals and Energy is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Lloyds Metals and Energy, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. What about risks? Every company has them, and we've spotted 2 warning signs for Lloyds Metals and Energy (of which 1 is significant!) you should know about.

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.