Does Spacenet Enterprises India (NSE:SPCENET) Deserve A Spot On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Spacenet Enterprises India (NSE:SPCENET), which has not only revenues, but also profits. 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 Spacenet Enterprises India

Spacenet Enterprises India's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Spacenet Enterprises India grew its EPS from ₹0.049 to ₹0.18, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.

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. Spacenet Enterprises India's EBIT margins have actually improved by 7.5 percentage points in the last year, to reach 9.3%, but, on the flip side, revenue was down 24%. That's not a good look.

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.

Spacenet Enterprises India isn't a huge company, given its market capitalisation of ₹17b. That makes it extra important to check on its balance sheet strength.

Are Spacenet Enterprises India Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Spacenet Enterprises India insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at ₹2.9b. That's a lot of money, and no small incentive to work hard. Those holdings account for over 17% of the company; visible skin in the game.

Does Spacenet Enterprises India Deserve A Spot On Your Watchlist?

Spacenet Enterprises India's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Spacenet Enterprises India very closely. What about risks? Every company has them, and we've spotted 1 warning sign for Spacenet Enterprises India you should know about.

Although Spacenet Enterprises India certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.