Here's Why We Think Pramara Promotions (NSE:PRAMARA) Might Deserve Your Attention Today

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Pramara Promotions (NSE:PRAMARA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Pramara Promotions

Pramara Promotions' Improving Profits

Over the last three years, Pramara Promotions has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Pramara Promotions' EPS shot from ₹2.62 to ₹6.00, over the last year. Year on year growth of 129% is certainly a sight to behold. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. The music to the ears of Pramara Promotions shareholders is that EBIT margins have grown from 11% to 15% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

Since Pramara Promotions is no giant, with a market capitalisation of ₹1.2b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Pramara Promotions Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Pramara Promotions insiders own a meaningful share of the business. Indeed, with a collective holding of 71%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Although, with Pramara Promotions being valued at ₹1.2b, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to ₹837m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is Pramara Promotions Worth Keeping An Eye On?

Pramara Promotions' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Pramara Promotions for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for Pramara Promotions (1 is significant!) that you need to be mindful of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.