Power Mech Projects (NSE:POWERMECH) Ticks All The Boxes When It Comes To Earnings Growth

Simply Wall St · 10/16 00:14

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Power Mech Projects (NSE:POWERMECH), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Power Mech Projects

Power Mech Projects' Improving Profits

Over the last three years, Power Mech Projects has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Over the last year, Power Mech Projects increased its EPS from ₹74.27 to ₹81.43. That amounts to a small improvement of 9.6%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Power Mech Projects remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to ₹43b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NSEI:POWERMECH Earnings and Revenue History October 16th 2024

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Power Mech Projects' balance sheet strength, before getting too excited.

Are Power Mech Projects Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Power Mech Projects insiders own a significant number of shares certainly is appealing. In fact, they own 58% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. And their holding is extremely valuable at the current share price, totalling ₹60b. That level of investment from insiders is nothing to sneeze at.

Should You Add Power Mech Projects To Your Watchlist?

One important encouraging feature of Power Mech Projects is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. We don't want to rain on the parade too much, but we did also find 1 warning sign for Power Mech Projects that you need to be mindful of.

Although Power Mech Projects certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.