Here's Why We Think Wonderla Holidays (NSE:WONDERLA) Is Well Worth Watching

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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

View our latest analysis for Wonderla Holidays

Wonderla Holidays' Improving Profits

Wonderla Holidays 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. Thus, it makes sense to focus on more recent growth rates, instead. Wonderla Holidays' EPS skyrocketed from ₹21.64 to ₹30.12, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 39%.

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 Wonderla Holidays is growing revenues, and EBIT margins improved by 2.7 percentage points to 43%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Wonderla Holidays' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Wonderla Holidays Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Our analysis into Wonderla Holidays has shown that insiders have sold ₹2.6m worth of shares over the last 12 months. But this is outweighed by the trades from Non-Executive Director Priya Sarah Joseph who spent ₹9.3m buying shares, at an average price of around ₹848. And that's a reason to be optimistic.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Wonderla Holidays will reveal that insiders own a significant piece of the pie. In fact, they own 70% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. At the current share price, that insider holding is worth a staggering ₹35b. That means they have plenty of their own capital riding on the performance of the business!

Does Wonderla Holidays Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Wonderla Holidays' strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. Of course, just because Wonderla Holidays is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Wonderla Holidays, you'll probably love this curated collection of companies in IN that have witnessed growth alongside insider buying in the last three months.

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.