We Ran A Stock Scan For Earnings Growth And Winpak (TSE:WPK) Passed With Ease

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Winpak (TSE:WPK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Winpak

How Fast Is Winpak Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. To the delight of shareholders, Winpak's EPS soared from US$1.56 to US$1.96, over the last year. That's a impressive gain of 26%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Winpak remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 25% to US$1.2b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Winpak.

Are Winpak Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's pleasing to note that insiders spent US$2.8m buying Winpak shares, over the last year, without reporting any share sales whatsoever. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Chairman of the Board, Antti Aarnio-Wihuri, who made the biggest single acquisition, paying CA$1.9m for shares at about CA$37.60 each.

It's commendable to see that insiders have been buying shares in Winpak, but there is more evidence of shareholder friendly management. Namely, Winpak has a very reasonable level of CEO pay. For companies with market capitalisations between US$1.0b and US$3.2b, like Winpak, the median CEO pay is around US$2.3m.

Winpak's CEO took home a total compensation package of US$825k in the year prior to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Winpak Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Winpak's strong EPS growth. To add to the positives, Winpak has recorded instances of insider buying and a modest executive pay to boot. On balance the message seems to be that this stock is worth looking at, at least for a while. Of course, just because Winpak is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Keen growth investors love to see insider buying. Thankfully, Winpak isn't the only one. You can see a 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.