Here's Why We Think Allsec Technologies (NSE:ALLSEC) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Allsec Technologies (NSE:ALLSEC). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Allsec Technologies

How Fast Is Allsec Technologies Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Allsec Technologies has achieved impressive annual EPS growth of 56%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Allsec Technologies remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to ₹4.9b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Allsec Technologies is no giant, with a market capitalisation of ₹17b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Allsec Technologies Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in Allsec Technologies in the previous 12 months. So it's definitely nice that Chief Executive Officer Naozer Cusrow Dalal bought ₹2.6m worth of shares at an average price of around ₹910. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

The good news, alongside the insider buying, for Allsec Technologies bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at ₹1.3b. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 7.7% of the shares on issue for the business, an appreciable amount considering the market cap.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Naozer Cusrow Dalal is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Allsec Technologies with market caps between ₹8.4b and ₹34b is about ₹15m.

Allsec Technologies' CEO only received compensation totalling ₹1.6m in the year to March 2023. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Allsec Technologies Worth Keeping An Eye On?

Allsec Technologies' earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Allsec Technologies belongs near the top of your watchlist. However, before you get too excited we've discovered 2 warning signs for Allsec Technologies (1 can't be ignored!) that you should be aware of.

The good news is that Allsec Technologies is not the only stock with insider buying. Here's a list of small cap, undervalued companies in IN with insider buying in the last three months!

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.