Does SKM Egg Products Export (India) (NSE:SKMEGGPROD) Deserve A Spot On Your Watchlist?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in SKM Egg Products Export (India) (NSE:SKMEGGPROD). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for SKM Egg Products Export (India)

SKM Egg Products Export (India)'s Improving Profits

In the last three years SKM Egg Products Export (India)'s earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, SKM Egg Products Export (India)'s EPS shot from ₹1.52 to ₹3.94, over the last year. You don't see 159% year-on-year growth like that, very often.

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). While SKM Egg Products Export (India) may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

SKM Egg Products Export (India) isn't a huge company, given its market capitalization of ₹1.7b. That makes it extra important to check on its balance sheet strength.

Are SKM Egg Products Export (India) 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Like a sturdy phalanx SKM Egg Products Export (India) insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the CEO, MD & Executive Director, S. K. M. ShivKumar, paid ₹5.9m to buy shares at an average price of ₹47.28.

And the insider buying isn't the only sign of alignment between shareholders and the board, since SKM Egg Products Export (India) insiders own more than a third of the company. In fact, they own 54% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only ₹1.7b SKM Egg Products Export (India) is really small for a listed company. So despite a large proportional holding, insiders only have ₹920m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Is SKM Egg Products Export (India) Worth Keeping An Eye On?

SKM Egg Products Export (India)'s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. 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 SKM Egg Products Export (India) deserves timely attention. Before you take the next step you should know about the 6 warning signs for SKM Egg Products Export (India) (1 is a bit concerning!) that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of SKM Egg Products Export (India), 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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