Does Lincoln Pharmaceuticals (NSE:LINCOLN) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Lincoln Pharmaceuticals (NSE:LINCOLN). 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.

View our latest analysis for Lincoln Pharmaceuticals

Lincoln Pharmaceuticals' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Lincoln Pharmaceuticals grew its EPS by 13% per year. That's a good rate of growth, if it can be sustained.

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. Lincoln Pharmaceuticals maintained stable EBIT margins over the last year, all while growing revenue 11% to ₹5.4b. That's progress.

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.

Lincoln Pharmaceuticals isn't a huge company, given its market capitalisation of ₹11b. That makes it extra important to check on its balance sheet strength.

Are Lincoln Pharmaceuticals Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The real kicker here is that Lincoln Pharmaceuticals insiders spent a staggering ₹276m on acquiring shares in just one year, without single share being sold in the meantime. Knowing this, Lincoln Pharmaceuticals will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the Head of Sales & Marketing and Whole Time Director, Ashish Patel, who made the biggest single acquisition, paying ₹30m for shares at about ₹488 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Lincoln Pharmaceuticals insiders own more than a third of the company. Indeed, with a collective holding of 53%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at ₹5.8b at the current share price. That's nothing to sneeze at!

Does Lincoln Pharmaceuticals Deserve A Spot On Your Watchlist?

One positive for Lincoln Pharmaceuticals is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. If you think Lincoln Pharmaceuticals might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

The good news is that Lincoln Pharmaceuticals 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.