Does Paradeep Phosphates (NSE:PARADEEP) Deserve A Spot On Your Watchlist?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Paradeep Phosphates (NSE:PARADEEP). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is Paradeep Phosphates 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. Shareholders will be happy to know that Paradeep Phosphates' EPS has grown 18% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. The good news is that Paradeep Phosphates is growing revenues, and EBIT margins improved by 3.3 percentage points to 9.5%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

View our latest analysis for Paradeep Phosphates

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 Paradeep Phosphates' future profits.

Are Paradeep Phosphates 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, Paradeep Phosphates insiders have stood united by refusing to sell shares over the last year. But more importantly, company insider Rajeev Nambiar spent ₹5.0m acquiring shares, doing so at an average price of ₹110. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Should You Add Paradeep Phosphates To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Paradeep Phosphates' strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out Paradeep Phosphates in more detail. We should say that we've discovered 2 warning signs for Paradeep Phosphates that you should be aware of before investing here.

The good news is that Paradeep Phosphates is not the only stock with insider buying. Here's a list of small cap, undervalued companies in IN 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.