Should You Be Adding Agro Phos (India) (NSE:AGROPHOS) To Your Watchlist 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Agro Phos (India) (NSE:AGROPHOS). 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 Agro Phos (India)

How Fast Is Agro Phos (India) Growing Its Earnings Per Share?

Over the last three years, Agro Phos (India) 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. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Agro Phos (India)'s EPS grew from ₹2.00 to ₹3.43, over the previous 12 months. Year on year growth of 72% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that Agro Phos (India)'s revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. On the one hand, Agro Phos (India)'s EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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.

Since Agro Phos (India) is no giant, with a market capitalisation of ₹809m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Agro Phos (India) Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Agro Phos (India) insiders own a significant number of shares certainly is appealing. Owning 35% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only ₹809m Agro Phos (India) is really small for a listed company. So despite a large proportional holding, insiders only have ₹287m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add Agro Phos (India) To Your Watchlist?

Agro Phos (India)'s earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Agro Phos (India) very closely. However, before you get too excited we've discovered 3 warning signs for Agro Phos (India) that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.