Here's Why I Think Hatsun Agro Product (NSE:HATSUN) Might Deserve Your Attention Today

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Hatsun Agro Product (NSE:HATSUN). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

See our latest analysis for Hatsun Agro Product

How Quickly Is Hatsun Agro Product Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Hatsun Agro Product's EPS has grown 37% each year, compound, over three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

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. The good news is that Hatsun Agro Product is growing revenues, and EBIT margins improved by 3.6 percentage points to 8.4%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Hatsun Agro Product Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, 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.

Although we did see some insider selling (worth -₹79m) this was overshadowed by a mountain of buying, totalling ₹533m in just one year. This makes me even more interested in Hatsun Agro Product because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by MD & Executive Director C. Sathyan for ₹516m worth of shares, at about ₹619 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Hatsun Agro Product insiders own more than a third of the company. Indeed, with a collective holding of 78%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. And their holding is extremely valuable at the current share price, totalling ₹140b. That means they have plenty of their own capital riding on the performance of the business!

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, C. Sathyan, is paid less than the median for similar sized companies. For companies with market capitalizations between ₹147b and ₹469b, like Hatsun Agro Product, the median CEO pay is around ₹49m.

The CEO of Hatsun Agro Product only received ₹8.2m in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Hatsun Agro Product To Your Watchlist?

For growth investors like me, Hatsun Agro Product's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for Hatsun Agro Product that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hatsun Agro Product, 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. 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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