For some speculators, the excitement of investing in a company that has the potential to reverse its fortunes is a big draw, so even a company with no revenue or profits and an underperforming track record can still manage to find investors. I can. But as Peter Lynch said, One Up on Wall Street, “Long shots rarely pay off.” Although cash-rich companies may suffer losses for years, they must eventually generate profits. Otherwise, investors will move on and the company will decline.
Despite the era of blue-sky investing in tech stocks, many investors still employ traditional strategies.Buy shares in profitable companies such as CIE Automotive India (NSE:CIEINDIA). This is not to say that the company offers the best investment opportunities, but profitability is a key factor in business success.
Check out our latest analysis for CIE Automotive India.
How fast is CIE Automotive India growing its earnings per share?
Over the past three years, CIE Automotive India has grown its earnings per share (EPS) at an impressive rate from a relatively low point. As a result, the three-year growth rate is not particularly indicative of future performance. Therefore, it makes sense to focus on more recent growth rates instead. To the delight of shareholders, CIE Automotive India's EPS soared from ₹15.88 to ₹21.49 in the last year. This is a staggering 35% increase for him.
Carefully considering revenue growth and earnings before interest, tax, and tax (EBIT) margins can help inform our view on the sustainability of recent earnings growth. All of CIE Automotive India's revenue last year was Operating revenue, so please note that the revenue and profit figures used in this article may not be the most representative of the underlying business. In fact, CIE Automotive India's EBIT margin improved by 3.9 points to 12% in the last year, but on the other hand, its revenue fell by 7.7%. While not a dire result, the numbers could be even better.
The graph below shows how the company's revenue and revenue have trended over time. Click on the image for more details.
Although we live in the present moment, there is little doubt that the future is paramount in the investment decision process. So why not check out this interactive chart depicting his future EPS estimates for CIE Automotive India?
Are CIE Automotive India's insiders in line with all shareholders?
Investors can feel secure in owning shares in a company when insiders also own shares, and their interests are closely aligned. Followers of CIE Automotive India will be relieved to know that insiders have significant capital, aligning the best interests of a broader group of shareholders. Specifically, they hold ₹3.5 billion worth of shares. This significant investment should help increase the long-term value of the business. Despite only owning 2.0% of the company, the investment value is enough to indicate that insiders are well contributing to this venture.
It's good to see insiders invested in the company, but are their remuneration levels reasonable? Based on the CEO's remuneration, they would certainly argue that they are. Our analysis reveals that the median total compensation for CEOs at companies like CIE Automotive India, with market capitalizations ranging from his Rs 83 billion to his Rs 266 billion, is around Rs 36 million.
The CIE Automotive India CEO received a total remuneration of just Rs 2.3 million in the year ending December 2022. This total may indicate that CEOs are sacrificing take-home pay for performance-based benefits, and that their motivation is synonymous with strong company performance. Although CEO compensation levels are not the most important indicator for investors, modest compensation can support stronger alignment between CEOs and public shareholders. It is also a sign of a culture of integrity in a broader sense.
Should you add CIE Automotive India to your Watchlist?
If you believe that share prices follow earnings per share, then you should dig deeper into CIE Automotive India's strong EPS growth. If you need more convincing than just EPS growth, don't forget the reasonable compensation and high insider ownership. Everyone has their own preferences when it comes to investments, but there's no doubt that CIE Automotive India is a really interesting one. For example, CIE Automotive India needs to be aware of risks. 1 warning sign I think you should know.
CIE Automotive India certainly looks good, but if insiders have been buying up shares, it could become more attractive to more investors. If you want to know which companies have insider buying, then take a look at this curated selection of Indian companies that not only boast strong growth, but also have recent insider buying.
Please note that insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis, including below, to see if CIE Automotive India is potentially overvalued or undervalued. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
