Is Now The Time To Put DC Infotech and Communication (NSE:DCI) On Your Watchlist?

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like DC Infotech and Communication (NSE:DCI). 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.

View our latest analysis for DC Infotech and Communication

How Fast Is DC Infotech and Communication Growing Its Earnings Per Share?

DC Infotech and Communication 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. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, DC Infotech and Communication's EPS shot from ₹1.83 to ₹3.34, over the last year. It's not often a company can achieve year-on-year growth of 82%. That could be a sign that the business has reached a true 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 DC Infotech and Communication remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 33% to ₹2.3b. That's progress.

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

Since DC Infotech and Communication is no giant, with a market capitalisation of ₹1.5b, you should definitely check its cash and debt before getting too excited about its prospects.

Are DC Infotech and Communication 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 DC Infotech and Communication insiders own a meaningful share of the business. Indeed, with a collective holding of 86%, 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. To give you an idea, the value of insiders' holdings in the business are valued at ₹1.3b at the current share price. That's nothing to sneeze at!

Should You Add DC Infotech and Communication To Your Watchlist?

DC Infotech and Communication's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering DC Infotech and Communication for a spot on your watchlist. We should say that we've discovered 2 warning signs for DC Infotech and Communication (1 is potentially serious!) that you should be aware of before investing here.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.