Top 10 stocks with FY21 EPS upgrades last 3 of 4 qtrs, time to buy?

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26 Aug, 2025 12:21

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Warren Buffett once said, ‘"If you don't feel comfortable making a rough estimate of the asset's future earnings, just forget it and move on."

Earnings growth is an important factor in determining the future price of a stock. And, the consistent growth in earnings despite a challenging environment, especially in the last 12 months, is worth a look.

There are as many as 10 stocks that have seen FY21 Earnings Per Share (EPS) upgrades in the last three out of four quarters in the BSE100 list, according to a report from Elara Securities.

The list includes names like Bajaj Finance, HDFC Life Insurance, ACC, Asian Paints, Nestle India, HPCL, BHEL, Federal Bank, NMDC, and Bharti Infratel.

The next big question in front of investors is – are they value buy? Well, experts feel that most of the stocks might be trading at rich valuations. But, given the growth potential, they could command higher valuations for some more time.

“Some of them are momentum buy where valuations are not cheap but earning momentum may continue like Bajaj Finance, HDFC Life Insurance, Asian Paints and Nestle while some of them provide value at current levels like ACC, HPCL, Federal Bank, BHEL, NMDC, and Bharti Infratel,” Amit Gupta, Co-Founder and CEO, TradingBells, told Moneycontrol.

“HPCL may try to bridge the valuation gap with BPCL whereas Federal Bank may attract investors as the worst phase is over for the counter. Bajaj Finance, HDFC life, Nestle and Asian paint may continue their rally as earnings growth is visible in these counters,” he said.

What is EPS?

Let’s also understand what is Earnings Per Share (EPS), and why is it important. When analyzing stocks on a fundamental basis, earning per share (EPS) is an important ratio which projects how much a shareholder earns on per share bought.

It is calculated by dividing the net profit by the number of outstanding shares. Earnings per share is the portion of a company's distributable profit allocated to each outstanding share of common stock.

“Earnings per share serves as an indicator of a company's profitability which helps in comparing the companies and look for the company with high earning power. To find out whether the earning power of the company has improved or deteriorated EPS calculated over a number of years is helpful,” Ritesh Asher, Chief Strategy Officer at KIFS Trade Capital, told Moneycontrol.

“A steady growth in EPS indicates how eligible the company is in making money for its shareholders and also it showcases the performance of management of the company as how they are handling things in case of changes in profit and also managing the effect of the issuance of new shares,” he said.

EPS upgradation is positive news for the company and its shareholders led by a pickup in performance which are key drivers of the stock’s performance, Asher further added.

What should investors do?

The big question is if investors should press the buy or sell button based on EPS upgrades? Well, EPS is an important parameter when someone is analyzing the company based on fundamentals, but it should not be looked in isolation.

Experts feel that investors should track EPS of at least four-five years while other important parameters which one should include are Return on Equity (RoE), as well as Return on Capital Employed (RoCE).

“No doubt EPS upgrade is one of the most important factors to buy any stock but some other parameters should also be considered like valuation, ROE, ROCE and positioning of the market,” said Gupta of TradingBells.

“Sometimes earning upgrades come at the top of the earnings momentum in any stock or Industry but stocks fail to justify the same earning growth in the following years. Most importantly, the market is a forward-looking animal and most of the time all good or bad news is discounted in the price,” he said.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.