Here's Why We Think Pondy Oxides And Chemicals (NSE:POCL) Is Well Worth Watching

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Pondy Oxides And Chemicals (NSE:POCL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Pondy Oxides And Chemicals with the means to add long-term value to shareholders.

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Pondy Oxides And Chemicals' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Pondy Oxides And Chemicals managed to grow EPS by 4.2% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. 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 33% to ₹22b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Pondy Oxides And Chemicals

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Pondy Oxides And Chemicals' balance sheet strength, before getting too excited.

Are Pondy Oxides And Chemicals 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 Pondy Oxides And Chemicals will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Owning 49% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about ₹18b riding on the stock, at current prices. That's nothing to sneeze at!

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

As previously touched on, Pondy Oxides And Chemicals is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Even so, be aware that Pondy Oxides And Chemicals is showing 1 warning sign in our investment analysis , you should know about...

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.