Here's Why I Think SKM Egg Products Export (India) (NSE:SKMEGGPROD) Might Deserve Your Attention Today

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. 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 SKM Egg Products Export (India) (NSE:SKMEGGPROD). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

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

SKM Egg Products Export (India)'s Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud SKM Egg Products Export (India)'s stratospheric annual EPS growth of 56%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. SKM Egg Products Export (India)'s EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

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 ₹2.0b. 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

For the sake of balance, I do note SKM Egg Products Export (India) insiders sold -₹1.9m worth of shares last year. But this is outweighed by the CEO, MD & Executive Director S. K. M. ShivKumar who spent ₹6.5m buying shares, at an average price of around around ₹70.17.

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 55% 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. Of course, SKM Egg Products Export (India) is a very small company, with a market cap of only ₹2.0b. That means insiders only have ₹1.1b worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

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 incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest SKM Egg Products Export (India) belongs on the top of your watchlist. We should say that we've discovered 2 warning signs for SKM Egg Products Export (India) that you should be aware of before investing here.

As a growth investor I do like to see insider buying. But SKM Egg Products Export (India) 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.

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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.