We Ran A Stock Scan For Earnings Growth And Precision Metaliks (NSE:PRECISION) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Precision Metaliks (NSE:PRECISION). 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.

Check out our latest analysis for Precision Metaliks

How Fast Is Precision Metaliks Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Precision Metaliks has grown EPS by 38% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Precision Metaliks maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹1.8b. That's encouraging news for the company!

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

Since Precision Metaliks is no giant, with a market capitalisation of ₹748m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Precision Metaliks Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations under ₹17b, like Precision Metaliks, the median CEO pay is around ₹3.3m.

The CEO of Precision Metaliks was paid just ₹1.0m in total compensation for the year ending March 2023. 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 shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Precision Metaliks Deserve A Spot On Your Watchlist?

Precision Metaliks' earnings have taken off in quite an impressive fashion. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. So Precision Metaliks looks like it could be a good quality growth stock, at first glance. That's worth watching. You still need to take note of risks, for example - Precision Metaliks has 2 warning signs we think you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by recent insider purchases.

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. 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.