Should You Be Adding IntraSoft Technologies (NSE:ISFT) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like IntraSoft Technologies (NSE:ISFT). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 IntraSoft Technologies

IntraSoft Technologies's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that IntraSoft Technologies has grown EPS by 39% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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). IntraSoft Technologies's EBIT margins have actually improved by 2.5 percentage points in the last year, to reach 2.9%, but, on the flip side, revenue was down 33%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since IntraSoft Technologies is no giant, with a market capitalization of ₹2.7b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are IntraSoft Technologies Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that IntraSoft Technologies insiders own a significant number of shares certainly appeals to me. In fact, they own 60% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₹1.6b riding on the stock, at current prices. That's nothing to sneeze at!

Is IntraSoft Technologies Worth Keeping An Eye On?

IntraSoft Technologies's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering IntraSoft Technologies for a spot on your watchlist. It is worth noting though that we have found 4 warning signs for IntraSoft Technologies (1 is significant!) that you need to take into consideration.

Although IntraSoft Technologies certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.