Does Flexopack Société Anonyme Commercial and Industrial Plastics (ATH:FLEXO) Deserve A Spot On Your Watchlist?

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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Flexopack Société Anonyme Commercial and Industrial Plastics (ATH:FLEXO), 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Flexopack Société Anonyme Commercial and Industrial Plastics

Flexopack Société Anonyme Commercial and Industrial Plastics's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Flexopack Société Anonyme Commercial and Industrial Plastics managed to grow EPS by 14% per year, over three years. That's a pretty good rate, if the company can sustain it.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Flexopack Société Anonyme Commercial and Industrial Plastics is growing revenues, and EBIT margins improved by 2.5 percentage points to 13%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

Since Flexopack Société Anonyme Commercial and Industrial Plastics is no giant, with a market capitalization of €105m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Flexopack Société Anonyme Commercial and Industrial Plastics Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Flexopack Société Anonyme Commercial and Industrial Plastics insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 65%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about €68m riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Flexopack Société Anonyme Commercial and Industrial Plastics To Your Watchlist?

One important encouraging feature of Flexopack Société Anonyme Commercial and Industrial Plastics is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Flexopack Société Anonyme Commercial and Industrial Plastics 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. 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.
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