Does InfoBeans Technologies (NSE:INFOBEAN) Deserve A Spot 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. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in InfoBeans Technologies (NSE:INFOBEAN). 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.

See our latest analysis for InfoBeans Technologies

How Fast Is InfoBeans Technologies Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that InfoBeans Technologies has grown EPS by 44% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. InfoBeans Technologies maintained stable EBIT margins over the last year, all while growing revenue 50% to ₹2.7b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since InfoBeans Technologies is no giant, with a market capitalisation of ₹17b, you should definitely check its cash and debt before getting too excited about its prospects.

Are InfoBeans Technologies 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Over the last 12 months InfoBeans Technologies insiders spent ₹7.4m more buying shares than they received from selling them. On balance, that's a good sign. It is also worth noting that it was Co-Founder Siddharth Sethi who made the biggest single purchase, worth ₹2.2m, paying ₹401 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for InfoBeans Technologies will reveal that insiders own a significant piece of the pie. To be exact, company insiders hold 80% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at ₹13b at the current share price. That's nothing to sneeze at!

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Siddharth Sethi is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to InfoBeans Technologies, with market caps between ₹7.9b and ₹32b, is around ₹16m.

The CEO of InfoBeans Technologies was paid just ₹4.5m in total compensation for the year ending March 2021. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does InfoBeans Technologies Deserve A Spot On Your Watchlist?

InfoBeans Technologies' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest InfoBeans Technologies belongs near the top of your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if InfoBeans Technologies is trading on a high P/E or a low P/E, relative to its industry.

The good news is that InfoBeans Technologies 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.