Do Indos's (WSE:INS) Earnings Warrant Your Attention?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Indos (WSE:INS), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Indos

How Quickly Is Indos Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Indos managed to grow EPS by 9.2% per year, over three years. That's a good rate of growth, if it can be sustained.

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. To cut to the chase Indos's EBIT margins dropped last year, and so did its revenue. That will not make it easy to grow profits, to say the least.

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 Indos is no giant, with a market capitalization of zł22m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Indos 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 Indos insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 94%, 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. Of course, Indos is a very small company, with a market cap of only zł22m. So despite a large proportional holding, insiders only have zł21m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is Indos Worth Keeping An Eye On?

One important encouraging feature of Indos is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. You still need to take note of risks, for example - Indos has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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.