Does Piramal Enterprises (NSE:PEL) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Piramal Enterprises (NSE:PEL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Piramal Enterprises

How Fast Is Piramal Enterprises Growing Its Earnings Per Share?

Piramal Enterprises 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. So it would be better to isolate the growth rate over the last year for our analysis. Piramal Enterprises' EPS skyrocketed from ₹78.77 to ₹103, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 31%.

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. Our analysis has highlighted that Piramal Enterprises' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Piramal Enterprises' EBIT margins are flat but, worryingly, its revenue is actually down. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Piramal Enterprises' future profits.

Are Piramal Enterprises Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Piramal Enterprises followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at ₹1.1b. That's a lot of money, and no small incentive to work hard. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Piramal Enterprises Worth Keeping An Eye On?

You can't deny that Piramal Enterprises has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Piramal Enterprises (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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.