Is Now The Time To Put Indbank Merchant Banking Services (NSE:INDBANK) 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Indbank Merchant Banking Services (NSE:INDBANK). 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 Indbank Merchant Banking Services

Indbank Merchant Banking Services' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Indbank Merchant Banking Services' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 48%. 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. It's noted that Indbank Merchant Banking Services' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Indbank Merchant Banking Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 154% to ₹196m. That's progress.

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 Indbank Merchant Banking Services is no giant, with a market capitalisation of ₹1.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Indbank Merchant Banking Services Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Indbank Merchant Banking Services, with market caps under ₹17b is around ₹3.3m.

Indbank Merchant Banking Services' CEO only received compensation totalling ₹1.5m in the year to March 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 a culture of integrity, in a broader sense.

Is Indbank Merchant Banking Services Worth Keeping An Eye On?

Indbank Merchant Banking Services' earnings per share have been soaring, with growth rates sky high. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. So Indbank Merchant Banking Services looks like it could be a good quality growth stock, at first glance. That's worth watching. However, before you get too excited we've discovered 3 warning signs for Indbank Merchant Banking Services that you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.