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

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for AVG Logistics

AVG Logistics' Improving Profits

In the last three years AVG Logistics' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, AVG Logistics' EPS catapulted from ₹9.65 to ₹25.33, over the last year. Year on year growth of 163% is certainly a sight to behold.

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 maintained stable EBIT margins over the last year, all while growing revenue 17% to ₹5.0b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since AVG Logistics is no giant, with a market capitalisation of ₹7.0b, you should definitely check its cash and debt before getting too excited about its prospects.

Are AVG Logistics Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that AVG Logistics insiders own a meaningful share of the business. In fact, they own 56% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at ₹3.9b at the current share price. So there's plenty there to keep them focused!

Is AVG Logistics Worth Keeping An Eye On?

AVG Logistics' earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, AVG Logistics is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that AVG Logistics is showing 4 warning signs in our investment analysis , and 1 of those is concerning...

Although AVG Logistics certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.