Here's Why We Think Trent (NSE:TRENT) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Trent (NSE:TRENT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Trent

How Fast Is Trent Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Trent has achieved impressive annual EPS growth of 53%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. EBIT margins for Trent remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 81% to ₹74b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Trent's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Trent 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Trent insiders refrain from selling stock during the year, but they also spent ₹6.1m buying it. That's nice to see, because it suggests insiders are optimistic.

It's reassuring that Trent insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations between ₹329b and ₹988b, like Trent, the median CEO pay is around ₹67m.

The CEO of Trent only received ₹33m in total compensation for the year ending March 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.

Should You Add Trent To Your Watchlist?

Trent's earnings have taken off in quite an impressive fashion. Not to mention the company's insiders have been adding to their portfolios and the CEO's remuneration policy looks to have had shareholders in mind seeing as it's quite modest for the company size. The strong EPS growth suggests Trent may be at an inflection point. If so, then its potential for further gains probably merit a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Trent that you need to be mindful of.

The good news is that Trent is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.