Should You Be Adding Privi Speciality Chemicals (NSE:PRIVISCL) To Your Watchlist Today?

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Privi Speciality Chemicals (NSE:PRIVISCL), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Our free stock report includes 2 warning signs investors should be aware of before investing in Privi Speciality Chemicals. Read for free now.

Privi Speciality Chemicals' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Privi Speciality Chemicals grew its EPS by 6.0% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. The good news is that Privi Speciality Chemicals is growing revenues, and EBIT margins improved by 6.0 percentage points to 14%, 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 Privi Speciality 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 Privi Speciality Chemicals' balance sheet strength, before getting too excited.

Are Privi Speciality Chemicals Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, Independent Non-Executive Director Anurag Surana spent ₹8.9m acquiring shares, doing so at an average price of ₹1,782. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Along with the insider buying, another encouraging sign for Privi Speciality Chemicals is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth ₹24b. This totals to 30% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Should You Add Privi Speciality Chemicals To Your Watchlist?

One important encouraging feature of Privi Speciality Chemicals is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. We should say that we've discovered 2 warning signs for Privi Speciality Chemicals (1 is potentially serious!) that you should be aware of before investing here.

Keen growth investors love to see insider activity. Thankfully, Privi Speciality Chemicals isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.