Does Madhya Bharat Agro Products (NSE:MBAPL) Deserve A Spot On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Madhya Bharat Agro Products (NSE:MBAPL). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Madhya Bharat Agro Products

Madhya Bharat Agro Products's Improving Profits

Over the last three years, Madhya Bharat Agro Products has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Madhya Bharat Agro Products's EPS shot from ₹8.45 to ₹19.61, over the last year. You don't see 132% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

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 Madhya Bharat Agro Products did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

Madhya Bharat Agro Products isn't a huge company, given its market capitalization of ₹11b. That makes it extra important to check on its balance sheet strength.

Are Madhya Bharat Agro Products Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Madhya Bharat Agro Products insiders have a significant amount of capital invested in the stock. Indeed, they hold ₹1.1b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.6% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Madhya Bharat Agro Products Worth Keeping An Eye On?

Madhya Bharat Agro Products's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Madhya Bharat Agro Products for a spot on your watchlist. Even so, be aware that Madhya Bharat Agro Products is showing 2 warning signs in our investment analysis , you should know about...

Although Madhya Bharat Agro Products certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.