Here's Why We Think Wealth First Portfolio Managers (NSE:WEALTH) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Wealth First Portfolio Managers (NSE:WEALTH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Wealth First Portfolio Managers with the means to add long-term value to shareholders.

View our latest analysis for Wealth First Portfolio Managers

How Fast Is Wealth First Portfolio Managers 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. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Wealth First Portfolio Managers has achieved impressive annual EPS growth of 53%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Wealth First Portfolio Managers' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Wealth First Portfolio Managers achieved similar EBIT margins to last year, revenue grew by a solid 90% to ₹745m. That's a real positive.

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 Wealth First Portfolio Managers is no giant, with a market capitalisation of ₹16b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Wealth First Portfolio Managers 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 Wealth First Portfolio Managers will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 64% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹10b invested in the business, at the current share price. That's nothing to sneeze at!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between ₹8.4b and ₹34b, like Wealth First Portfolio Managers, the median CEO pay is around ₹15m.

The CEO of Wealth First Portfolio Managers only received ₹6.5m in total compensation for the year ending March 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Wealth First Portfolio Managers Deserve A Spot On Your Watchlist?

Wealth First Portfolio Managers' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Wealth First Portfolio Managers certainly ticks a few boxes, so we think it's probably well worth further consideration. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Wealth First Portfolio Managers (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Indian companies which have demonstrated growth backed by significant insider holdings.

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.