But what if I told you that, when it comes to investing, the simplest approach often yields the best results?
Today, we’ll discuss one such simple yet effective approach to investing.
You can track and understand many financial metrics, but in the end, it all comes down to how much of the company’s revenue translates into profits.
Investors can disregard all other aspects and filters except for this, because this is ultimately what they invest in.
All other providers of capital to the company get their returns before the earnings are available for the shareholders. So, the most important metric for equity investors to track is the net earnings that the company generates.
Now the question is, how can one predict or have an expectation of the earnings that the company could generate going forward?
Analysts often build complex models to track various companies, but for individual investors, the simpler approach is to look for the guidance management offers for both revenue and net income for future periods.
Let’s look at some companies that have given strong growth guidance for the future.
First on our list is Pricol Ltd.
Pricol manufactures and sells instrument clusters and other allied automobile components to OEMs and replacement markets. The company was formed by amalgamating Pricol Ltd and Pricol Pune Ltd in FY17 due to huge losses in its acquired subsidiaries in Brazil.
Its product portfolio includes driver information and connected vehicle actuation, control, and fluid management systems. The company produces sensors, connected vehicle solutions, battery management systems (BMS), instrument clusters, telematics, fuel pump modules, disc brakes, oil pumps, water pumps, wiping systems, cabin tilting systems, and fuel feed pumps.
Pricol has nine manufacturing plants in India and international offices in 4 destinations.
From 2020 to 2024, the company experienced significant growth. Sales increased at a 5-year compounded annual growth rate (CAGR) of 5%, and net profits rose by 23%. The return on equity (RoE) and return on capital employed (RoCE) averaged 8.9% and 13.8%, respectively.
In FY24, revenue amounted to ₹22.1 billion, marking a 16% YoY increase from ₹19 billion in FY23. Net income reached ₹1.4 billion, up by 12.7% compared to ₹1.25 billion in the previous financial year. Currently, 8% of the revenue comes from the export market.
Pricol has gained market share in the two/three-wheeler space and plans to improve further based on recent Letters of Intent received from Honda Scooters India. Capacity utilization for the year stood at 85%, and the company has planned capex of roughly ₹2-2.2 billion for organic facility upgrades in Pune and Coimbatore.
The company’s management aims to achieve ₹32 billion in organic sales by FY26, supplemented by approximately ₹4 billion from inorganic acquisitions, targeting an overall growth rate of 21% over the years.
To reach this ambitious goal, Pricol has been expanding its product lines and acquiring new customers.
Second on our list is C.E. Info Systems Ltd, popularly known as MapmyIndia.
C.E. Info Systems is a data and technology products and platforms company offering proprietary digital maps as a service (MaaS), software as a service (SaaS), and platform as a service (PaaS). The company is India’s leading provider of advanced digital maps, geospatial software, and location-based IoT technologies, accounting for 95% of the total market cap of the industry.
MapmyIndia has been an early mover (started in 1995) in India’s digital mapping and pioneered digital mapping in India. It serves B2B and B2B2C enterprise customers, holding a 95% market share of the in-dash navigation market for India and over 80% market share in automotive OEM navigation software.
The company operates two main business verticals: map and data products, and platform and IoT products. MapmyIndia provides advanced maps representing the real world in 2D and 3D, updated continuously in near real-time for place updates, location-based events, safety alerts, changes in road conditions, live traffic, and weather. The company also builds and releases digital maps for countries outside India, such as Sri Lanka, Bangladesh, Nepal, Bhutan, Myanmar, UAE, and Egypt.
From 2020 to 2024, sales increased at a compounded annual growth rate (CAGR) of 23%, and net profits rose by 46%. The RoE and RoCE averaged 20.8% and 19.4%, respectively.
In FY24, the total revenue from operations grew by 35% YoY. Consumer tech & enterprise digital transformation revenue was up 49% YoY to ₹1.9 billion, and automotive & mobility tech revenue was up 23% to ₹1.8 billion. The map & data revenue rose by 23% to ₹1.4 billion, while platform & IoT revenue surged by 42% to ₹2.4 billion. Net income grew by 23% YoY, with cash & cash equivalents reaching ₹5.5 billion by FY24-end.
The annual new order booking increased significantly, up 63% to ₹8.3 billion in FY24. With a focus on IoT-led business, the company aims to surpass ₹10 billion in revenue by FY28, a CAGR growth of 28%.
Third on our list is PI Industries Ltd.
PI Industries is a prominent manufacturer of insecticides, fungicides, herbicides, and specialty products widely used in agriculture. With five decades of experience in the agrochemical sector, it’s a leading producer of generic molecules in India. PI operates in more than 30 countries worldwide and boasts an extensive distribution network comprising 10,000 active dealers/distributors and over 100,000 retailers nationwide.
From 2020 to 2024, sales increased at a compounded annual growth rate (CAGR) of 22%, and net profits rose by 33%. The RoE and RoCE averaged 18.4% and 21.5%, respectively.
This performance continued in 2024. Sales and net profits grew 18% and 37%, respectively. Despite delivering a strong performance, the stock price has been trading rangebound. PI Industries is targeting a 15% revenue growth for the year, with domestic business expected to recover soon based on IMD monsoon forecasts. Post-FY25, the company anticipates returning to 20% revenue growth as the industry cycle normalizes.
Next is Rategain Travel Tech Ltd, a leading provider of software solutions for the tourism industry.
Rategain assists the hospitality sector with dynamic pricing strategies through its Software-as-a-Service (SaaS) platform. Using AI technology, Rategain enhances customer engagement for clients such as hotels, airlines, and online travel agencies by optimizing pricing and service offerings. The company uniquely bridges the information gap in the industry by compiling and analyzing traveler data to improve industry-wide service delivery.
From 2020 to 2024, sales increased at a CAGR of 30%, and net profits rose by 75%. The RoE and RoCE averaged 6.6% and 4.1%, respectively.
After a challenging period due to COVID-19, Rategain has shown remarkable recovery, turning into profitability from FY22. In FY24, sales grew by 69% YoY to ₹9.5 billion, while net income more than doubled compared to FY23. Strong revenue growth was complemented by improved operational performance with margins at 19.8% for FY24.
The SaaS business contributed 32.9% of the total revenue for FY24, driven by strong traction with key enterprise accounts and new clients in airlines, OTAs, car rentals, and cruise liners. The distribution segment accounted for 22.1% of the total revenue, recognized as an elite connectivity partner by Expedia for the second consecutive year. The marketing and technology (martech) business contributed 45% of the total revenue, supported by robust growth in the paid digital marketing segment and continued success in social media management with leading hospitality brands in North America.
The company aims to increase its revenue from approximately ₹10 billion in FY24 to ₹20 billion over the next three years, targeting a 26% CAGR with 20% from organic growth and 6% from inorganic growth. It also plans to maintain a debt-free balance sheet.
CMS Info Systems Ltd offers logistical and technological services to financial institutions, focusing on ATM-managed services, technology solutions, and cash logistics.
The company is renowned for its expertise in cash logistics, ATM software solutions, and AIoT (Artificial Intelligence of Things) remote monitoring. CMS Info Systems has established a presence in 97% of Indian districts.
From 2020 to 2024, CMS Infosystems achieved a CAGR of 15% in sales and 30% in net profit. The RoE and RoCE averaged 19.4% and 27.1%, respectively. The company generated revenue of ₹22.6 billion in FY24, reflecting a growth rate of 18% YoY, while net income grew by 16.8% YoY to ₹3.4 billion.
Looking forward, the management expresses confidence in its mid-term outlook for FY25, targeting ₹25-27 billion in revenue. It is also expecting higher capex for FY25 due to underspending in FY24.
These companies are tapping into market opportunities and maintaining upward growth trends. However, such companies can be volatile, testing investor patience during market fluctuations. By staying aware of market changes and taking advantage of opportunities, investors can make the most of positive trends while protecting their investments from potential risks.
Happy investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
