Here’s Why We Think Bajaj Finance (NSE:BAJFINANCE) Is Well Worth Watching

It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

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 Bajaj Finance (NSE:BAJFINANCE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bajaj Finance with the means to add long-term value to shareholders.

Check out our latest analysis for Bajaj Finance

How Quickly Is Bajaj Finance Increasing Earnings Per Share?

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. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Bajaj Finance has managed to grow EPS by 24% per year over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away satisfied.

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. It’s noted that Bajaj Finance’s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Bajaj Finance maintained stable EBIT margins over the last year, all while growing revenue 71% to ₹225b. That’s progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

NSEI:BAJFINANCE Earnings and Revenue History December 26th 2022

While we live in the present moment, there’s little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Bajaj Finance?

Are Bajaj Finance Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₹3.8t company like Bajaj Finance. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their shares with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at ₹12b. This comes in at 0.3% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Bajaj Finance To Your Watchlist?

For growth investors, Bajaj Finance’s raw rate of earnings growth is a beacon in the night. Furthermore, the high level of insider ownership is impressive and suggests that management appreciates the EPS growth and has faith in Bajaj Finance’s continuing strength. The growth and insider confidence is looked upon well and so it’s worth while to investigate further with a view to discern the stock’s true value. What about risks? Every company has them, and we’ve spotted 2 warning signs for Bajaj Finance you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

Valuation is complex, but we’re helping make it simple.

Find out whether Bajaj Finance is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

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