Does TCPL Packaging (NSE:TCPLPACK) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
May 12, 2022
NSEI:TCPLPACK
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like TCPL Packaging (NSE:TCPLPACK). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for TCPL Packaging

How Quickly Is TCPL Packaging Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Over the last three years, TCPL Packaging has grown EPS by 16% per year. That's a good rate of growth, if it can be sustained.

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. TCPL Packaging maintained stable EBIT margins over the last year, all while growing revenue 15% to ₹10b. That's a real positive.

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.

earnings-and-revenue-history
NSEI:TCPLPACK Earnings and Revenue History May 12th 2022

Since TCPL Packaging is no giant, with a market capitalization of ₹6.1b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are TCPL Packaging 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. As a result, I'm encouraged by the fact that insiders own TCPL Packaging shares worth a considerable sum. Indeed, they hold ₹1.1b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 19% of the company; visible skin in the game.

Is TCPL Packaging Worth Keeping An Eye On?

One important encouraging feature of TCPL Packaging is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. What about risks? Every company has them, and we've spotted 4 warning signs for TCPL Packaging you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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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