Here's Why We Think Tata Consultancy Services (NSE:TCS) Might Deserve Your Attention Today

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Tata Consultancy Services (NSE:TCS). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Tata Consultancy Services

How Fast Is Tata Consultancy Services Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Tata Consultancy Services grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Tata Consultancy Services achieved similar EBIT margins to last year, revenue grew by a solid 5.2% to ₹2.4t. That's progress.

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.

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

Are Tata Consultancy Services Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹15t company like Tata Consultancy Services. But we are reassured by the fact they have invested in the company. Indeed, they hold ₹1.7b worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 0.01% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Tata Consultancy Services Worth Keeping An Eye On?

One positive for Tata Consultancy Services is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Tata Consultancy Services is trading on a high P/E or a low P/E, relative to its industry.

Although Tata Consultancy Services 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.