Here's Why We Think Thomas Scott (India) (NSE:THOMASCOTT) Is Well Worth Watching

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Thomas Scott (India) (NSE:THOMASCOTT). 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.

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How Fast Is Thomas Scott (India) Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Outstandingly, Thomas Scott (India)'s EPS shot from ₹4.53 to ₹10.76, over the last year. It's not often a company can achieve year-on-year growth of 137%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Thomas Scott (India) remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 89% to ₹1.6b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Thomas Scott (India)

Since Thomas Scott (India) is no giant, with a market capitalisation of ₹4.2b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Thomas Scott (India) 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 Thomas Scott (India) will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 71% of the company, so their decisions have a significant impact on their investments. 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. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.0b at the current share price. That's nothing to sneeze at!

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Thomas Scott (India) with market caps under ₹17b is about ₹3.6m.

The Thomas Scott (India) CEO received total compensation of only ₹1.4m in the year to March 2024. 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 it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Thomas Scott (India) Worth Keeping An Eye On?

Thomas Scott (India)'s earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Thomas Scott (India) is worth considering carefully. It is worth noting though that we have found 2 warning signs for Thomas Scott (India) that you need to take into consideration.

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.