Should You Be Adding AVG Logistics (NSE:AVG) To Your Watchlist Today?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like AVG Logistics (NSE:AVG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AVG Logistics with the means to add long-term value to shareholders.

See our latest analysis for AVG Logistics

How Fast Is AVG Logistics Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that AVG Logistics grew its EPS from ₹2.52 to ₹11.01, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. AVG Logistics shareholders can take confidence from the fact that EBIT margins are up from 7.5% to 11%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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 AVG Logistics is no giant, with a market capitalisation of ₹6.6b, you should definitely check its cash and debt before getting too excited about its prospects.

Are AVG Logistics Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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. So, on balance, the insider transactions are mildly encouraging. 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.

And the insider buying isn't the only sign of alignment between shareholders and the board, since AVG Logistics insiders own more than a third of the company. In fact, they own 55% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.6b at the current share price. That's nothing to sneeze at!

Is AVG Logistics Worth Keeping An Eye On?

AVG Logistics' earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest AVG Logistics belongs near the top of your watchlist. Still, you should learn about the 4 warning signs we've spotted with AVG Logistics (including 1 which is a bit unpleasant).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of AVG Logistics, you'll probably love this curated collection of companies in IN that have an attractive valuation alongside 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.