Here's Why I Think Hatsun Agro Product (NSE:HATSUN) Is An Interesting Stock

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.

So if you're like me, you might be more interested in profitable, growing companies, like Hatsun Agro Product (NSE:HATSUN). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Hatsun Agro Product

How Fast Is Hatsun Agro Product Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Who among us would not applaud Hatsun Agro Product's stratospheric annual EPS growth of 39%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. Hatsun Agro Product maintained stable EBIT margins over the last year, all while growing revenue 18% to ₹61b. 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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Hatsun Agro Product's balance sheet strength, before getting too excited.

Are Hatsun Agro Product Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While we did see insider selling of Hatsun Agro Product stock in the last year, one single insider spent plenty more buying. To wit, Non-Executive Chairman R. Chandramogan outlaid ₹100m for shares, at about ₹955 per share. That certainly pricks my ears up.

On top of the insider buying, we can also see that Hatsun Agro Product insiders own a large chunk of the company. Indeed, with a collective holding of 79%, 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. And their holding is extremely valuable at the current share price, totalling ₹223b. That means they have plenty of their own capital riding on the performance of the business!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, C. Sathyan is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between ₹150b and ₹480b, like Hatsun Agro Product, the median CEO pay is around ₹44m.

The Hatsun Agro Product CEO received total compensation of just ₹8.0m in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Hatsun Agro Product Worth Keeping An Eye On?

Hatsun Agro Product's earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Hatsun Agro Product deserves timely attention. We should say that we've discovered 3 warning signs for Hatsun Agro Product that you should be aware of before investing here.

As a growth investor I do like to see insider buying. But Hatsun Agro Product 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.

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.

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