Is Now The Time To Put Innovana Thinklabs (NSE:INNOVANA) On Your Watchlist?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Innovana Thinklabs (NSE:INNOVANA). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Innovana Thinklabs

Innovana Thinklabs's Improving Profits

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Innovana Thinklabs grew its EPS from ₹4.50 to ₹18.47, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Innovana Thinklabs is growing revenues, and EBIT margins improved by 27.7 percentage points to 34%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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

Since Innovana Thinklabs is no giant, with a market capitalization of ₹1.7b, so you should definitely check its cash and debtbefore 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 as you can imagine, the fact that Innovana Thinklabs insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 74%, company insiders are in control and have plenty of capital behind the venture. 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 ₹1.2b riding on the stock, at current prices. That's nothing to sneeze at!

Does Innovana Thinklabs Deserve A Spot On Your Watchlist?

Innovana Thinklabs's earnings per share growth has been so hot recently that thinking about it is making me blush. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Innovana Thinklabs for a spot on your watchlist. Of course, just because Innovana Thinklabs is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

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 freelist of growing companies that insiders are buying, could be exactly what you're looking for.

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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.