We Ran A Stock Scan For Earnings Growth And Premier Explosives (NSE:PREMEXPLN) Passed With Ease

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Premier Explosives (NSE:PREMEXPLN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Premier Explosives with the means to add long-term value to shareholders.

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Premier Explosives' Improving Profits

Over the last three years, Premier Explosives has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Premier Explosives' EPS soared from ₹5.09 to ₹6.83, over the last year. That's a fantastic gain of 34%.

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. While Premier Explosives did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

View our latest analysis for Premier Explosives

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 Premier Explosives' balance sheet strength, before getting too excited.

Are Premier Explosives Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in Premier Explosives will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Owning 46% 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 ₹14b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between ₹18b and ₹71b, like Premier Explosives, the median CEO pay is around ₹26m.

Premier Explosives offered total compensation worth ₹19m to its CEO in the year to March 2025. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Premier Explosives Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Premier Explosives' strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Premier Explosives has underlying strengths that make it worth a look at. What about risks? Every company has them, and we've spotted 1 warning sign for Premier Explosives 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.