Is Now The Time To Put Trent (NSE:TRENT) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Trent (NSE:TRENT). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Trent

Trent's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Trent's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 53%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Trent shareholders can take confidence from the fact that EBIT margins are up from 5.6% to 8.9%, and revenue is growing. 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. For finer detail, click on the image.

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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that Trent insiders spent ₹6.1m on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future.

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. The median total compensation for CEOs of companies similar in size to Trent, with market caps between ₹326b and ₹977b, is around ₹65m.

The Trent CEO received ₹33m in compensation for the year ending March 2022. That is actually below the median for CEO's of similarly sized companies. 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. It can also be a sign of a culture of integrity, in a broader sense.

Does Trent Deserve A Spot On 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. It could be that Trent is at an inflection point, given the EPS growth. If these have piqued your interest, then this stock surely warrants a spot on your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for Trent you should know about.

Keen growth investors love to see insider buying. Thankfully, Trent isn't the only one. You can see a a free list of them here.

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.