The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit, and a history of failure can successfully find investors. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always in a race against time to achieve financial viability, so investors in these companies may take on more risk than they should.

So if this idea of ​​high risk and high reward doesn’t sit well with you, you might be more interested in profitable and growing businesses, like Sonata Software (NSE: SONATSOFTW). Even if this company is correctly valued by the market, investors would agree that generating consistent earnings will continue to provide Sonata Software with the means to add long-term shareholder value.

Check out our latest analysis for Sonata Software

How fast is Sonata Software growing earnings per share?

If you think markets are even remotely efficient, you expect a company’s share price to follow its earnings-per-share (EPS) performance over the long term. This makes EPS growth an attractive quality for any business. We can see that over the past three years, Sonata Software has increased its EPS by 15% per year. That’s a good growth rate, if it can be sustained.

It is often useful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another idea of ​​the quality of the company’s growth. Sonata Software has maintained stable EBIT margins over the past year, while growing revenue by 31% to ₹56 billion. It is progress.

The graph below shows how the company’s bottom line and top results have grown over time. Click on the table to see the exact numbers.

You don’t drive with your eyes on the rearview mirror, so you might be more interested in that free report showing analyst forecasts for Sonata Software coming profits.

Are Sonata Software insiders aligned with all shareholders?

Seeing insiders owning a large portion of the issued shares is often a good sign. Their incentives will be aligned with investors and there is less likelihood of a sudden sell-off impacting the stock price. So we’re happy to report that Sonata Software insiders own a significant share of the company. In fact, they own 38% of the shares, making insiders a very influential group of shareholders. Shareholders and speculators should be reassured by this type of alignment, as it suggests that the company will be run for the benefit of shareholders. At the current share price, this insider stake is worth ₹25 billion. That’s an incredible endorsement from them.

Does Sonata Software deserve a spot on your watchlist?

As mentioned earlier, Sonata Software is a growing company, which is encouraging. For those looking for a little more than that, the high level of insider ownership adds to our excitement for this growth. This combination is very attractive. So yes, we think the stock is worth watching. It should be noted, however, that we found 3 warning signs for Sonata software that you need to consider.

There is always the possibility of doing well by buying stocks that are not increased income and not have insiders buying stocks. But for those who consider these measures important, we encourage you to check out the companies that 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.

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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.