Here's Why We Think Perma-Pipe International Holdings (NASDAQ:PPIH) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Perma-Pipe International Holdings (NASDAQ:PPIH). 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.

Check out our latest analysis for Perma-Pipe International Holdings

How Fast Is Perma-Pipe International Holdings Growing Its Earnings Per Share?

Perma-Pipe International Holdings 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. Over the last year, Perma-Pipe International Holdings increased its EPS from US$0.56 to US$0.60. That amounts to a small improvement of 7.9%.

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. Perma-Pipe International Holdings' EBIT margins are flat but, worryingly, its revenue is actually down. Suffice it to say that is not a great sign of growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Perma-Pipe International Holdings is no giant, with a market capitalisation of US$56m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Perma-Pipe International Holdings 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Perma-Pipe International Holdings insiders refrain from selling stock during the year, but they also spent US$60k buying it. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Director, Robert McNally, who made the biggest single acquisition, paying US$50k for shares at about US$8.46 each.

Should You Add Perma-Pipe International Holdings To Your Watchlist?

As previously touched on, Perma-Pipe International Holdings is a growing business, which is encouraging. It's not easy for business to grow EPS, but Perma-Pipe International Holdings has shown the strengths to do just that. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. Before you take the next step you should know about the 1 warning sign for Perma-Pipe International Holdings that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Perma-Pipe International Holdings, you'll probably love this free list of growing companies that insiders are buying.

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.