With EPS Growth And More, Phantom Digital Effects (NSE:PHANTOMFX) Makes An Interesting Case

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Phantom Digital Effects with the means to add long-term value to shareholders.

See our latest analysis for Phantom Digital Effects

Phantom Digital Effects' Improving Profits

Phantom Digital Effects has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Phantom Digital Effects' EPS has risen over the last 12 months, growing from ₹13.38 to ₹16.47. This amounts to a 23% gain; a figure that shareholders will be pleased to see.

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. Phantom Digital Effects maintained stable EBIT margins over the last year, all while growing revenue 75% to ₹864m. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since Phantom Digital Effects is no giant, with a market capitalisation of ₹6.8b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Phantom Digital Effects 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 Phantom Digital Effects will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 55%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹3.7b invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Phantom Digital Effects Worth Keeping An Eye On?

One positive for Phantom Digital Effects is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Before you take the next step you should know about the 2 warning signs for Phantom Digital Effects that we have uncovered.

Although Phantom Digital Effects certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Indian companies that not only boast of strong growth but have also seen recent insider buying..

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.