Here's Why We Think Pritish Nandy Communications (NSE:PNC) Is Well Worth Watching

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Pritish Nandy Communications (NSE:PNC). 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.

Check out our latest analysis for Pritish Nandy Communications

How Quickly Is Pritish Nandy Communications Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Pritish Nandy Communications has grown EPS by 50% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. Pritish Nandy Communications's EBIT margins have actually improved by 5.3 percentage points in the last year, to reach 12%, but, on the flip side, revenue was down 52%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Pritish Nandy Communications is no giant, with a market capitalization of ₹245m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Pritish Nandy Communications 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 we're pleased to report that Pritish Nandy Communications insiders own a meaningful share of the business. Actually, with 45% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, Pritish Nandy Communications is a very small company, with a market cap of only ₹245m. So despite a large proportional holding, insiders only have ₹111m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Pritish Nandy Communications with market caps under ₹15b is about ₹3.3m.

The CEO of Pritish Nandy Communications was paid just ₹2.8m in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.

Should You Add Pritish Nandy Communications To Your Watchlist?

Pritish Nandy Communications's earnings have taken off like any random crypto-currency did, back in 2017. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Pritish Nandy Communications certainly ticks a few of my boxes, so I think it's probably well worth further consideration. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Pritish Nandy Communications (at least 1 which is significant) , and understanding them should be part of your investment process.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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