Should You Be Adding Punjab Chemicals and Crop Protection (NSE:PUNJABCHEM) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Punjab Chemicals and Crop Protection (NSE:PUNJABCHEM). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Punjab Chemicals and Crop Protection

Punjab Chemicals and Crop Protection's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, Punjab Chemicals and Crop Protection's EPS soared from ₹15.27 to ₹19.51, in just one year. That's a commendable gain of 28%.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Punjab Chemicals and Crop Protection's EBIT margins are flat but, of some concern, its revenue is actually down. Suffice it to say that is not a great sign of growth.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Punjab Chemicals and Crop Protection isn't a huge company, given its market capitalization of ₹9.9b. That makes it extra important to check on its balance sheet strength.

Are Punjab Chemicals and Crop Protection Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Punjab Chemicals and Crop Protection insiders have a significant amount of capital invested in the stock. To be specific, they have ₹1.0b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 10% of the company; visible skin in the game.

Is Punjab Chemicals and Crop Protection Worth Keeping An Eye On?

You can't deny that Punjab Chemicals and Crop Protection has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. You still need to take note of risks, for example - Punjab Chemicals and Crop Protection has 1 warning sign we think you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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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