Should You Be Adding Verde Agritech (TSE:NPK) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Verde Agritech (TSE:NPK), 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. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Verde Agritech

Verde Agritech's Improving Profits

In the last three years Verde Agritech's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Verde Agritech's EPS shot from CA$0.016 to CA$0.029, over the last year. Year on year growth of 86% is certainly a sight to behold. 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. Verde Agritech maintained stable EBIT margins over the last year, all while growing revenue 126% to CA$19m. That's progress.

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 Verde Agritech is no giant, with a market capitalization of CA$112m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Verde Agritech Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Verde Agritech shares worth a considerable sum. To be specific, they have CA$24m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 21% of the company; visible skin in the game.

Should You Add Verde Agritech To Your Watchlist?

Verde Agritech's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. 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 Verde Agritech for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Verde Agritech that you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.