Here's Why We Think Pricol (NSE:PRICOLLTD) Might Deserve Your Attention Today

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 currently 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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

Check out our latest analysis for Pricol

How Fast Is Pricol Growing Its Earnings Per Share?

Pricol has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Pricol's EPS soared from ₹4.43 to ₹5.72, over the last year. That's a impressive gain of 29%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Pricol's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Pricol remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 3.7% to ₹17b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since Pricol is no giant, with a market capitalisation of ₹25b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Pricol Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Pricol insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at ₹6.7b, they have plenty of motivation to push the business to succeed. At 27% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Pricol, with market caps between ₹8.3b and ₹33b, is around ₹21m.

The CEO of Pricol was paid just ₹3.1m in total compensation for the year ending March 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Pricol Worth Keeping An Eye On?

For growth investors, Pricol's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Pricol has underlying strengths that make it worth a look at. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Pricol that you should be aware of.

Although Pricol certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.