Does Innovana Thinklabs (NSE:INNOVANA) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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 contrast to all that, I prefer to spend time on companies like Innovana Thinklabs (NSE:INNOVANA), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Innovana Thinklabs

Innovana Thinklabs's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Innovana Thinklabs's EPS has grown 26% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. This approach makes Innovana Thinklabs look pretty good, on balance; although revenue is flattish, EBIT margins improved from 30% to 40% in the last year. That's something to smile about.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Innovana Thinklabs is no giant, with a market capitalization of ₹3.4b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Innovana Thinklabs Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Innovana Thinklabs insiders own a meaningful share of the business. In fact, they own 78% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₹2.7b invested in the business, using the current share price. That's nothing to sneeze at!

Does Innovana Thinklabs Deserve A Spot On Your Watchlist?

You can't deny that Innovana Thinklabs has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Before you take the next step you should know about the 3 warning signs for Innovana Thinklabs (1 is significant!) that we have uncovered.

Although Innovana Thinklabs 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.