Here's Why We Think SKM Egg Products Export (India) (NSE:SKMEGGPROD) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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.

In contrast to all that, I prefer to spend time on companies like SKM Egg Products Export (India) (NSE:SKMEGGPROD), which has not only revenues, but also profits. 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.

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

How Fast Is SKM Egg Products Export (India) Growing Its Earnings Per Share?

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. As a result, I'll zoom in on growth over the last year, 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. Click on the chart to see the exact numbers.

SKM Egg Products Export (India) isn't a huge company, given its market capitalization of ₹1.3b. That makes it extra important to check on its balance sheet strength.

Are SKM Egg Products Export (India) Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.

We note that SKM Egg Products Export (India) insiders spent ₹14m on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was CEO, MD & Executive Director S. K. M. ShivKumar who made the biggest single purchase, worth ₹1.5m, paying ₹28.91 per share.

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. Indeed, with a collective holding of 55%, 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. Of course, SKM Egg Products Export (India) is a very small company, with a market cap of only ₹1.3b. That means insiders only have ₹716m 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 have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. 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. We should say that we've discovered 5 warning signs for SKM Egg Products Export (India) (1 doesn't sit too well with us!) that you should be aware of before investing here.

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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