Does Datamatics Global Services (NSE:DATAMATICS) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Datamatics Global Services (NSE:DATAMATICS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Datamatics Global Services with the means to add long-term value to shareholders.

View our latest analysis for Datamatics Global Services

How Fast Is Datamatics Global Services Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Datamatics Global Services has grown EPS by 31% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. EBIT margins for Datamatics Global Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 16% to ₹14b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Datamatics Global Services isn't a huge company, given its market capitalisation of ₹20b. That makes it extra important to check on its balance sheet strength.

Are Datamatics Global Services Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Datamatics Global Services insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹4.0b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 19% of the company, demonstrating a degree of high-level alignment with shareholders.

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. For companies with market capitalisations between ₹8.2b and ₹33b, like Datamatics Global Services, the median CEO pay is around ₹17m.

Datamatics Global Services offered total compensation worth ₹13m to its CEO in the year to March 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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 a culture of integrity, in a broader sense.

Does Datamatics Global Services Deserve A Spot On Your Watchlist?

You can't deny that Datamatics Global Services has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Datamatics Global Services is worth keeping an eye on. Before you take the next step you should know about the 1 warning sign for Datamatics Global Services that we have uncovered.

Although Datamatics Global Services 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.