Is Now The Time To Put Dredging Corporation of India (NSE:DREDGECORP) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

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 Dredging Corporation of India (NSE:DREDGECORP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Dredging Corporation of India with the means to add long-term value to shareholders.

Check out our latest analysis for Dredging Corporation of India

How Quickly Is Dredging Corporation of India Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Dredging Corporation of India's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 39%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Dredging Corporation of India shareholders can take confidence from the fact that EBIT margins are up from 0.6% to 6.4%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

Since Dredging Corporation of India is no giant, with a market capitalisation of ₹13b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Dredging Corporation of India Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between ₹8.3b and ₹33b, like Dredging Corporation of India, the median CEO pay is around ₹18m.

Dredging Corporation of India's CEO only received compensation totalling ₹4.1m in the year to March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Dredging Corporation of India To Your Watchlist?

Dredging Corporation of India's earnings per share growth have been climbing higher at an appreciable rate. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. So Dredging Corporation of India looks like it could be a good quality growth stock, at first glance. That's worth watching. Still, you should learn about the 2 warning signs we've spotted with Dredging Corporation of India (including 1 which doesn't sit too well with us).

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you 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. 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.