Does Sobha (NSE:SOBHA) 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. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sobha (NSE:SOBHA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Sobha Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Sobha has managed to grow EPS by 25% per year over three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

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. While Sobha did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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.

Check out our latest analysis for Sobha

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 Sobha.

Are Sobha Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First things first, there weren't any reports of insiders selling shares in Sobha in the last 12 months. Even better, though, is that the Founder & Chairman Emeritus, P. N. Menon, bought a whopping ₹69m worth of shares, paying about ₹1,183 per share, on average. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Sobha will reveal that insiders own a significant piece of the pie. In fact, they own 53% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. This is an incredible endorsement from them.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Sobha's CEO, Jagadish Nangineni, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Sobha with market caps between ₹89b and ₹283b is about ₹49m.

The Sobha CEO received ₹34m in compensation for the year ending March 2025. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Sobha Deserve A Spot On Your Watchlist?

You can't deny that Sobha has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Sobha's ROE with industry peers (and the market at large).

Keen growth investors love to see insider activity. Thankfully, Sobha isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.