Should You Be Adding Innovana Thinklabs (NSE:INNOVANA) To Your Watchlist Today?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Innovana Thinklabs (NSE:INNOVANA). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Innovana Thinklabs

How Fast Is Innovana Thinklabs Growing Its Earnings Per Share?

Over the last three years, Innovana Thinklabs has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Innovana Thinklabs's EPS shot from ₹10.44 to ₹21.22, over the last year. You don't see 103% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Innovana Thinklabs is growing revenues, and EBIT margins improved by 7.5 percentage points to 36%, 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.

Innovana Thinklabs isn't a huge company, given its market capitalization of ₹1.7b. That makes it extra important to check on its balance sheet strength.

Are Innovana Thinklabs 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 Innovana Thinklabs insiders own a significant number of shares certainly appeals to me. In fact, they own 80% 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 ₹1.4b invested in the business, using the current share price. That's nothing to sneeze at!

Should You Add Innovana Thinklabs To Your Watchlist?

Innovana Thinklabs's earnings per share have taken off like a rocket aimed right at the moon. 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 to my mind Innovana Thinklabs is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we've discovered 4 warning signs for Innovana Thinklabs (1 is concerning!) that you should be aware of.

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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