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

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.

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 Winpak (TSE:WPK). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Winpak

Winpak's Improving Profits

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. Winpak's EPS has risen over the last 12 months, growing from US$1.60 to US$1.97. This amounts to a 24% gain; a figure that shareholders will be pleased to see.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Winpak achieved similar EBIT margins to last year, revenue grew by a solid 18% to US$1.2b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Winpak's future profits.

Are Winpak Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for Winpak shareholders is that no insiders reported selling shares in the last year. Add in the fact that Petri Leskinen, the company insider of the company, paid US$33k for shares at around US$41.81 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Recent insider purchases of Winpak stock is not the only way management has kept the interests of the general public shareholders in mind. 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 worth US$1.2m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Winpak Worth Keeping An Eye On?

One positive for Winpak is that it is growing EPS. That's nice to see. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. All things considered, Winpak is certainly displaying its merits and is worthy of taking research to the next step. Now, you could try to make up your mind on Winpak by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Winpak, you'll probably love this free list of growing companies that insiders are buying.

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.