Here's Why We Think Tata Consultancy Services (NSE:TCS) Might Deserve Your Attention Today
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.
In contrast to all that, many investors prefer to focus on companies like Tata Consultancy Services (NSE:TCS), which has not only revenues, but also profits. 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 Tata Consultancy Services
How Fast Is Tata Consultancy Services Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Tata Consultancy Services managed to grow EPS by 8.8% per year, over three years. That's a good rate of growth, if it can be sustained.
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. EBIT margins for Tata Consultancy Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to ₹2.2t. That's progress.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Tata Consultancy Services' forecast profits?
Are Tata Consultancy Services 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.
It's nice to see that there have been no reports of any insiders selling shares in Tata Consultancy Services in the previous 12 months. Add in the fact that Damodar Padhi, the company insider of the company, paid ₹3.4m for shares at around ₹3,447 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Tata Consultancy Services.
On top of the insider buying, it's good to see that Tata Consultancy Services insiders have a valuable investment in the business. To be specific, they have ₹1.8b worth of shares. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.02%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is Tata Consultancy Services Worth Keeping An Eye On?
One important encouraging feature of Tata Consultancy Services is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Now, you could try to make up your mind on Tata Consultancy Services by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Tata Consultancy Services 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.
Tata Consultancy Services
Tata Consultancy Services Limited provides information technology (IT) and IT enabled services worldwide.
Flawless balance sheet established dividend payer.