Some have more money than sense, they say, so even companies with no revenue, no profit and a history of failures can easily find investors. But as Peter Lynch said in One Up on Wall Street“Long shots almost never pay off.”
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like Affle (India) (NSE: AFFLE). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when pressed.
See our latest analysis for Affle (India)
Affle (India) profit improvement
Over the past three years, earnings per share of Affle (India) have taken off like a rocket; fast and from a low base. So the actual growth rate doesn’t tell us much. It therefore makes sense to focus on the most recent growth rates instead. Like the latest New Year’s Eve fireworks accelerating across the sky, Affle (India)’s EPS has risen from ₹7.19 to ₹15.30 over the past year. 113% annual growth is certainly a sight to behold. This could be a sign that the company has reached a real inflection point.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high margin on earnings before interest and taxes (EBIT) to point to a competitive moat (although some low-margin companies also have moats). I note that income from Affle (India) operations was lower than its turnover over the last twelve months, which could distort my analysis of its margins. While we note that Affle (India)’s EBIT margins have remained stable over the past year, revenues have grown by 105% to ₹9.3 billion. This is a real plus point.
In the table below, you can see how the company has increased its profits and revenue over time. For more details, click on the image.
As we live in the moment at all times, there is no doubt in my mind that the future matters more than the past. So why not check out this interactive chart outlining future EPS estimates for Affle (India)?
Are Affle (India) insiders aligned with all shareholders?
Like standing on the lookout, surveying the horizon at sunrise, insider buying, for some investors, brings joy. This view is based on the possibility that stock purchases signal an uptrend on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Whichever way you look at it, Affle (India) shareholders can gain quiet confidence from the fact that insiders have shelled out £30m to buy shares over the past year. And when you consider that there has been no insider selling, you can understand why shareholders might believe that lady luck will grace this company. It should also be noted that it was CFO and COO Kapil Bhutani who made the largest single purchase, worth ₹28 million, paying ₹1,194 per share.
It’s reassuring that insiders at Affle (India) are buying the shares, but that’s not the only reason to believe management is fair to shareholders. I mean the very reasonable level of compensation for CEOs. I found out that the median total compensation of CEOs of companies like Affle (India) with a market capitalization between ₹75 billion and ₹239 billion is around ₹32 million.
The CEO of Affle (India) received a total compensation of just ₹250,000 in the year at . This could be considered a token amount and indicates that the company does not need to use the payment to incentivize the CEO – this is often a good sign. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. It can also be a sign of a culture of integrity, broadly defined.
Does Affle (India) deserve a spot on your watch list?
Earnings per share for Affle (India) took off like a rocket aimed straight at the moon. Even better, we can see insider buying and the CEO salary seems reasonable. It could be that Affle (India) is at an inflection point, given the growth in EPS. If so, the potential for additional earnings probably deserves a spot on your watch list. We don’t want to rain too much on the parade, but we also found 1 warning sign for Affle (India) which you must take into account.
The good news is that Affle (India) is not the only growth stock with insider buying. Here’s a list…with insider purchases over the past three months!
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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