Does PNB Gilts (NSE:PNBGILTS) Deserve A Spot On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like PNB Gilts (NSE:PNBGILTS). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for PNB Gilts

PNB Gilts's Improving Profits

In the last three years PNB Gilts's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, PNB Gilts's EPS shot from ₹10.35 to ₹25.23, over the last year. Year on year growth of 144% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that PNB Gilts's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note PNB Gilts's EBIT margins were flat over the last year, revenue grew by a solid 81% to ₹6.6b. That's a real positive.

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.

PNB Gilts isn't a huge company, given its market capitalization of ₹13b. That makes it extra important to check on its balance sheet strength.

Are PNB Gilts Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like PNB Gilts with market caps between ₹7.4b and ₹30b is about ₹17m.

The PNB Gilts CEO received ₹10m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is PNB Gilts Worth Keeping An Eye On?

PNB Gilts's earnings have taken off like any random crypto-currency did, back in 2017. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. While I couldn't be sure without a deeper dive, it does seem that PNB Gilts has the hallmarks of a quality business; and that would make it well worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with PNB Gilts , and understanding them should be part of your investment process.

Although PNB Gilts certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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. 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.
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