Is Now The Time To Put Affle (India) (NSE:AFFLE) On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Affle (India) (NSE:AFFLE). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Affle (India)

Affle (India)'s Improving Profits

In the last three years Affle (India)'s earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Affle (India)'s EPS shot from ₹7.19 to ₹15.30, over the last year. Year on year growth of 113% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Affle (India)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Affle (India)'s EBIT margins were flat over the last year, revenue grew by a solid 105% to ₹9.3b. That's a real positive.

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

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Affle (India)?

Are Affle (India) Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Any way you look at it Affle (India) shareholders can gain quiet confidence from the fact that insiders shelled out ₹30m to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Chief Financial & Operations Officer Kapil Bhutani who made the biggest single purchase, worth ₹28m, paying ₹1,194 per share.

It's reassuring that Affle (India) insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. I refer to the very reasonable level of CEO pay. I discovered that the median total compensation for the CEOs of companies like Affle (India) with market caps between ₹75b and ₹239b is about ₹32m.

The Affle (India) CEO received total compensation of only ₹250k in the year to . 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. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Affle (India) Deserve A Spot On Your Watchlist?

Affle (India)'s earnings per share have taken off like a rocket aimed right at the moon. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that Affle (India) is at an inflection point, given the EPS growth. If so, then it the potential for further gains probably merit a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Affle (India) that you need to be mindful of.

The good news is that Affle (India) is not the only growth stock with insider buying. Here's a list of them... 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.