Should You Be Adding Prolife Industries (NSE:PROLIFE) To Your Watchlist Today?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Prolife Industries (NSE:PROLIFE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Prolife Industries

Prolife Industries's Improving Profits

Over the last three years, Prolife Industries has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Prolife Industries's EPS shot from ₹7.02 to ₹13.29, over the last year. Year on year growth of 89% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. While we note Prolife Industries's EBIT margins were flat over the last year, revenue grew by a solid 54% to ₹605m. That's progress.

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.

Prolife Industries isn't a huge company, given its market capitalization of ₹229m. That makes it extra important to check on its balance sheet strength.

Are Prolife Industries 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 as you can imagine, the fact that Prolife Industries insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 93%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only ₹229m Prolife Industries is really small for a listed company. That means insiders only have ₹214m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations under ₹15b, like Prolife Industries, the median CEO pay is around ₹3.3m.

The Prolife Industries CEO received total compensation of only ₹2.4m in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me 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.

Does Prolife Industries Deserve A Spot On Your Watchlist?

Prolife Industries's earnings per share have taken off like a rocket aimed right at the moon. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so I do think Prolife Industries is worth considering carefully. We don't want to rain on the parade too much, but we did also find 3 warning signs for Prolife Industries (2 don't sit too well with us!) that you need to be mindful of.

Although Prolife Industries certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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. 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.
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