Are Pearl River Holdings (CVE:PRH) earnings worth your attention?

Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. And in their study titled Who falls prey to the wolf of Wall Street? » Leuz and. al. found that it is “fairly common” for investors to lose money by participating in “pump and dump” schemes.

Contrary to all that, I prefer to spend time on companies like Pearl River Fund (CVE:PRH), which not only generates revenue, but also profits. While that doesn’t make stocks worth buying at any price, you can’t deny that successful capitalism ultimately requires profits. Loss-making businesses are always in a race against time to achieve financial viability, but time is often the friend of a profitable business, especially if it is growing.

Check out our latest analysis for Pearl River Holdings

How fast is Pearl River Holdings growing?

The market is a short-term voting machine, but a long-term weighing machine, so stock price eventually follows earnings per share (EPS). This means EPS growth is seen as a real benefit by most successful long-term investors. Who among us wouldn’t applaud Pearl River Holdings’ stratospheric annual EPS growth of 59%, compounded, over the past three years? This kind of growth never lasts long, but like a shooting star, it’s worth watching when it happens.

One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. While we note that Pearl River Holdings’ EBIT margins have remained stable over the past year, revenues have increased by 20% to 355 million yen. This is a real plus point.

In the table below, you can see how the company has increased its profits and revenue over time. For more details, click on the image.

TSXV: PRH Earnings and Revenue History April 12, 2022

Pearl River Holdings is not a big company, given its market capitalization of C$8.2 million. It is therefore very important to check the strength of its balance sheet.

Are Pearl River Holdings insiders aligned with all shareholders?

I always like to check CEO compensation, because I think reasonable compensation levels around or below the median can be a sign that shareholder interests are well taken care of. For companies with a market cap of less than 1.3 billion yen, such as Pearl River Holdings, the median CEO salary is around 1.0 million yen.

The CEO of Pearl River Holdings received CN¥561,000 in compensation for the year ending. This is below average for companies of a similar size and seems pretty reasonable to me. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. I would also say that reasonable levels of compensation attest to good decision-making more generally.

Does Pearl River Holdings deserve a spot on your watch list?

Pearl River Holdings’ profits took off like any random cryptocurrency in 2017. With profits soaring, it seems likely that the company has a bright future; and it may have reached an inflection point. At the same time, the CEO’s reasonable compensation is a good reflection of the board. Although I can’t be sure without a deeper dive, it seems that Pearl River Holdings has the hallmarks of a quality company; and it would be worth watching. It should be noted, however, that we found 2 warning signs for Pearl River Holdings that you need to consider.

Of course, you can (sometimes) buy stocks that are not increased income and do not have insiders buying stocks. But as a growth investor, I always like to check out companies that To do have these characteristics. You can access a free list of them here.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.