Here's Why We Think AGI Greenpac (NSE:AGI) Might Deserve Your Attention Today

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 currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like AGI Greenpac (NSE:AGI). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for AGI Greenpac

How Fast Is AGI Greenpac Growing Its Earnings Per Share?

Over the last three years, AGI Greenpac has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. AGI Greenpac's EPS shot up from ₹28.29 to ₹41.53; a result that's bound to keep shareholders happy. That's a impressive gain of 47%.

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. The music to the ears of AGI Greenpac shareholders is that EBIT margins have grown from 12% to 19% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 AGI Greenpac's balance sheet strength, before getting too excited.

Are AGI Greenpac Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling AGI Greenpac shares, in the last year. So it's definitely nice that President & CEO of AGI Glaspac and Garden Polymer Rajesh Khosla bought ₹1.3m worth of shares at an average price of around ₹335. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in AGI Greenpac.

Along with the insider buying, another encouraging sign for AGI Greenpac is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth ₹11b. Coming in at 17% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.

Should You Add AGI Greenpac To Your Watchlist?

You can't deny that AGI Greenpac has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. Still, you should learn about the 2 warning signs we've spotted with AGI Greenpac.

Keen growth investors love to see insider buying. Thankfully, AGI Greenpac 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.