Here's Why We Think Imperial Ginseng Products (CVE:IGP) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Imperial Ginseng Products (CVE:IGP). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Imperial Ginseng Products

How Fast Is Imperial Ginseng Products Growing Its Earnings Per Share?

In the last three years Imperial Ginseng Products' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Imperial Ginseng Products' EPS has risen over the last 12 months, growing from CA$0.31 to CA$0.38. That's a 22% gain; respectable growth in the broader scheme of things.

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 Imperial Ginseng Products is growing revenues, and EBIT margins improved by 15.2 percentage points to -49%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Imperial Ginseng Products is no giant, with a market capitalisation of CA$14m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Imperial Ginseng Products Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Imperial Ginseng Products insiders own a meaningful share of the business. Owning 45% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, Imperial Ginseng Products is a very small company, with a market cap of only CA$14m. So this large proportion of shares owned by insiders only amounts to CA$6.4m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add Imperial Ginseng Products To Your Watchlist?

As previously touched on, Imperial Ginseng Products is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Imperial Ginseng Products has 5 warning signs (and 2 which don't sit too well with us) we think you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you 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.