Is Now The Time To Put Linc (NSE:LINC) On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Linc (NSE:LINC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Linc

How Fast Is Linc Growing Its Earnings Per Share?

In the last three years Linc's 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. Impressively, Linc's EPS catapulted from ₹13.27 to ₹25.92, over the last year. It's not often a company can achieve year-on-year growth of 95%.

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. The music to the ears of Linc shareholders is that EBIT margins have grown from 5.3% to 9.9% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Linc is no giant, with a market capitalisation of ₹11b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Linc 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While Linc insiders did net ₹11m selling stock over the last year, they invested ₹49m, a much higher figure. An optimistic sign for those with Linc in their watchlist. Zooming in, we can see that the biggest insider purchase was by MD & Chairman Deepak Jalan for ₹11m worth of shares, at about ₹488 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Linc insiders own more than a third of the company. In fact, they own 54% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about ₹5.8b riding on the stock, at current prices. That's nothing to sneeze at!

Does Linc Deserve A Spot On Your Watchlist?

Linc's earnings have taken off in quite an impressive fashion. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Linc deserves timely attention. What about risks? Every company has them, and we've spotted 1 warning sign for Linc you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Linc, you'll probably love this free list of growing companies that insiders are buying.

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.