Here's Why I Think Pritish Nandy Communications (NSE:PNC) Is An Interesting Stock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Pritish Nandy Communications (NSE:PNC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Pritish Nandy Communications

Pritish Nandy Communications's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Pritish Nandy Communications's stratospheric annual EPS growth of 40%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. On the one hand, Pritish Nandy Communications's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Pritish Nandy Communications isn't a huge company, given its market capitalization of ₹262m. That makes it extra important to check on its balance sheet strength.

Are Pritish Nandy Communications Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news for Pritish Nandy Communications shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Pallab Bhattacharya, the CEO & Whole Time Director of the company, paid ₹509k for shares at around ₹14.55 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Pritish Nandy Communications insiders own more than a third of the company. Actually, with 46% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Pritish Nandy Communications is a very small company, with a market cap of only ₹262m. So despite a large proportional holding, insiders only have ₹119m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Pallab Bhattacharya is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under ₹15b, like Pritish Nandy Communications, the median CEO pay is around ₹3.7m.

The Pritish Nandy Communications CEO received total compensation of only ₹2.0m in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Pritish Nandy Communications Worth Keeping An Eye On?

Pritish Nandy Communications's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Pritish Nandy Communications belongs on the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Pritish Nandy Communications (1 is concerning) you should be aware of.

The good news is that Pritish Nandy Communications is not the only growth stock with insider buying. Here's a list of them... 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.

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This article by Simply Wall St is general in nature. 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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