Does Pulz Electronics (NSE:PULZ) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Pulz Electronics (NSE:PULZ), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Pulz Electronics

How Fast Is Pulz Electronics Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Pulz Electronics has grown EPS by 46% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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 good news is that Pulz Electronics is growing revenues, and EBIT margins improved by 12.3 percentage points to 18%, over the last year. 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. To see the actual numbers, click on the chart.

Since Pulz Electronics is no giant, with a market capitalisation of ₹676m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Pulz Electronics Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Pulz Electronics will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 73%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Of course, Pulz Electronics is a very small company, with a market cap of only ₹676m. So this large proportion of shares owned by insiders only amounts to ₹496m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Pulz Electronics, with market caps under ₹16b is around ₹3.3m.

The CEO of Pulz Electronics was paid just ₹1.5m in total compensation for the year ending March 2022. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Pulz Electronics Deserve A Spot On Your Watchlist?

Pulz Electronics' earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Pulz Electronics certainly ticks a few boxes, so we think it's probably well worth further consideration. Even so, be aware that Pulz Electronics is showing 3 warning signs in our investment analysis , you should know about...

Although Pulz Electronics 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.