Here's Why Pondy Oxides And Chemicals (NSE:POCL) Has Caught The Eye Of Investors

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Pondy Oxides And Chemicals (NSE:POCL), which has not only revenues, but also profits. 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.

Check out our latest analysis for Pondy Oxides And Chemicals

Pondy Oxides And Chemicals' Improving Profits

In the last three years Pondy Oxides And Chemicals' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Pondy Oxides And Chemicals' EPS has risen over the last 12 months, growing from ₹38.46 to ₹44.99. This amounts to a 17% gain; a figure that shareholders will be pleased to see.

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. EBIT margins for Pondy Oxides And Chemicals remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to ₹16b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Pondy Oxides And Chemicals isn't a huge company, given its market capitalisation of ₹8.2b. That makes it extra important to check on its balance sheet strength.

Are Pondy Oxides And Chemicals Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Pondy Oxides And Chemicals will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 48% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.9b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Pondy Oxides And Chemicals Deserve A Spot On Your Watchlist?

One important encouraging feature of Pondy Oxides And Chemicals is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 6 warning signs for Pondy Oxides And Chemicals (2 don't sit too well with us!) that you need to be mindful of.

Although Pondy Oxides And Chemicals certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.