If EPS Growth Is Important To You, ICICI Bank (NSE:ICICIBANK) Presents An Opportunity
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. 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. 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 ICICI Bank (NSE:ICICIBANK). 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.
How Fast Is ICICI Bank Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that ICICI Bank's EPS has grown 20% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Our analysis has highlighted that ICICI Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note ICICI Bank achieved similar EBIT margins to last year, revenue grew by a solid 17% to ₹1.9t. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
See our latest analysis for ICICI Bank
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for ICICI Bank's future profits.
Are ICICI Bank Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a ₹9.6t company like ICICI Bank. But we do take comfort from the fact that they are investors in the company. To be specific, they have ₹1.9b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. 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.
Does ICICI Bank Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into ICICI Bank's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in ICICI Bank's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. We should say that we've discovered 1 warning sign for ICICI Bank that you should be aware of before investing here.
Although ICICI Bank 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.