Here's Why We Think Abhishek Integrations (NSE:AILIMITED) Is Well Worth Watching

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. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Abhishek Integrations (NSE:AILIMITED). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Abhishek Integrations with the means to add long-term value to shareholders.

Check out our latest analysis for Abhishek Integrations

Abhishek Integrations' Improving Profits

In the last three years Abhishek Integrations' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Abhishek Integrations' EPS shot up from ₹1.29 to ₹1.84; a result that's bound to keep shareholders happy. That's a commendable gain of 42%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Abhishek Integrations remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 113% to ₹167m. 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.

Since Abhishek Integrations is no giant, with a market capitalisation of ₹128m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Abhishek Integrations Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Abhishek Integrations insiders own a meaningful share of the business. Indeed, with a collective holding of 67%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only ₹128m Abhishek Integrations is really small for a listed company. So this large proportion of shares owned by insiders only amounts to ₹86m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add Abhishek Integrations To Your Watchlist?

For growth investors, Abhishek Integrations' raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. We don't want to rain on the parade too much, but we did also find 3 warning signs for Abhishek Integrations (2 are concerning!) that you need to be mindful of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.