Does AVG Logistics (NSE:AVG) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in AVG Logistics (NSE:AVG). 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.

See our latest analysis for AVG Logistics

AVG Logistics' Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for AVG Logistics to have grown EPS from ₹2.52 to ₹12.78 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. AVG Logistics shareholders can take confidence from the fact that EBIT margins are up from 7.5% to 11%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since AVG Logistics is no giant, with a market capitalisation of ₹5.5b, you should definitely check its cash and debt before getting too excited about its prospects.

Are AVG Logistics Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Insiders both bought and sold AVG Logistics shares in the last year, but the good news is they spent ₹2.5m more buying than they netted selling. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management. We also note that it was the Non-Executive Director, Apurva Chamaria, who made the biggest single acquisition, paying ₹2.6m for shares at about ₹265 each.

On top of the insider buying, we can also see that AVG Logistics insiders own a large chunk of the company. In fact, they own 63% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.5b at the current share price. That's nothing to sneeze at!

Should You Add AVG Logistics To Your Watchlist?

AVG Logistics' earnings have taken off in quite an impressive fashion. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe AVG Logistics deserves timely attention. It is worth noting though that we have found 3 warning signs for AVG Logistics (1 is concerning!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, AVG Logistics isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by recent insider buying.

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.