We Ran A Stock Scan For Earnings Growth And Phantom Digital Effects (NSE:PHANTOMFX) Passed With Ease

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Phantom Digital Effects (NSE:PHANTOMFX). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Phantom Digital Effects

Phantom Digital Effects' Improving Profits

In the last three years Phantom Digital Effects' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Phantom Digital Effects' EPS skyrocketed from ₹10.72 to ₹15.95, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 49%.

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 Phantom Digital Effects did well to grow revenue over the last year, EBIT margins were dampened at the same time. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since Phantom Digital Effects is no giant, with a market capitalisation of ₹5.6b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Phantom Digital Effects 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 we're pleased to report that Phantom Digital Effects insiders own a meaningful share of the business. Indeed, with a collective holding of 64%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about ₹3.6b riding on the stock, at current prices. That's nothing to sneeze at!

Is Phantom Digital Effects Worth Keeping An Eye On?

For growth investors, Phantom Digital Effects' raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Still, you should learn about the 3 warning signs we've spotted with Phantom Digital Effects (including 1 which can't be ignored).

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.