Does Dynacons Systems & Solutions (NSE:DSSL) Deserve A Spot On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Dynacons Systems & Solutions (NSE:DSSL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Dynacons Systems & Solutions

Dynacons Systems & Solutions's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Dynacons Systems & Solutions has managed to grow EPS by 26% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. While we note Dynacons Systems & Solutions's EBIT margins were flat over the last year, revenue grew by a solid 91% to ₹5.7b. That's a real positive.

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

Since Dynacons Systems & Solutions is no giant, with a market capitalization of ₹2.0b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Dynacons Systems & Solutions Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Dynacons Systems & Solutions insiders refrain from selling stock during the year, but they also spent ₹9.0m buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Chairman & MD, Shirish Anjaria, who made the biggest single acquisition, paying ₹4.5m for shares at about ₹28.00 each.

On top of the insider buying, we can also see that Dynacons Systems & Solutions insiders own a large chunk of the company. Indeed, with a collective holding of 55%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Dynacons Systems & Solutions is a very small company, with a market cap of only ₹2.0b. That means insiders only have ₹1.1b worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Does Dynacons Systems & Solutions Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Dynacons Systems & Solutions's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Even so, be aware that Dynacons Systems & Solutions is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

The good news is that Dynacons Systems & Solutions is not the only growth stock with insider buying. Here's a list of them... 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. 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.