Should You Be Adding PG Electroplast (NSE:PGEL) To Your Watchlist Today?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

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 PG Electroplast (NSE:PGEL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is PG Electroplast Growing Its Earnings Per Share?

In the last three years PG Electroplast's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, PG Electroplast's EPS shot from ₹4.42 to ₹7.49, over the last year. It's a rarity to see 69% year-on-year growth like that. The best case scenario? That the business has hit 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 PG Electroplast remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 62% to ₹40b. That's encouraging news for the company!

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.

Check out our latest analysis for PG Electroplast

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for PG Electroplast's future EPS 100% free.

Are PG Electroplast Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The ₹48m worth of shares that insiders sold during the last 12 months pales in comparison to the ₹181m they spent on acquiring shares in the company. This bodes well for PG Electroplast as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was company insider Ruchi Gupta who made the biggest single purchase, worth ₹53m, paying ₹328 per share.

On top of the insider buying, we can also see that PG Electroplast insiders own a large chunk of the company. In fact, they own 51% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. at the current share price. That means they have plenty of their own capital riding on the performance of the business!

Does PG Electroplast Deserve A Spot On Your Watchlist?

PG Electroplast's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe PG Electroplast deserves timely attention. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of PG Electroplast.

Keen growth investors love to see insider activity. Thankfully, PG Electroplast isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

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.