Here's Why I Think Archidply Industries (NSE:ARCHIDPLY) Is An Interesting Stock

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 contrast to all that, I prefer to spend time on companies like Archidply Industries (NSE:ARCHIDPLY), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Archidply Industries

How Fast Is Archidply Industries Growing Its Earnings Per Share?

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Archidply Industries grew its EPS from ₹0.37 to ₹2.94, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Archidply Industries maintained stable EBIT margins over the last year, all while growing revenue 38% to ₹2.9b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Since Archidply Industries is no giant, with a market capitalization of ₹887m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Archidply Industries Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalizations under ₹15b, like Archidply Industries, the median CEO pay is around ₹2.9m.

The Archidply Industries CEO received total compensation of only ₹320k in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Archidply Industries To Your Watchlist?

Archidply Industries's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Such fast EPS growth makes me wonder if the business has hit an inflection point (and I mean the good kind.) At the same time the reasonable CEO compensation reflects well on the board of directors. So Archidply Industries looks like it could be a good quality growth stock, at first glance. That's worth watching. What about risks? Every company has them, and we've spotted 4 warning signs for Archidply Industries (of which 1 is significant!) you should know about.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.