Should You Be Adding Agroliga Group (WSE:AGL) To Your Watchlist Today?

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. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Agroliga Group (WSE:AGL). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

View our latest analysis for Agroliga Group

Agroliga Group's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Agroliga Group has grown EPS by 25% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Unfortunately, revenue is down and so are margins. That is, not a hint of euphemism here, suboptimal.

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.

Agroliga Group isn't a huge company, given its market capitalization of zł37m. That makes it extra important to check on its balance sheet strength.

Are Agroliga Group Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Agroliga Group insiders own a meaningful share of the business. In fact, they own 83% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. Of course, Agroliga Group is a very small company, with a market cap of only zł37m. So despite a large proportional holding, insiders only have €31m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Agroliga Group Deserve A Spot On Your Watchlist?

You can't deny that Agroliga Group has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Agroliga Group (at least 2 which are concerning) , and understanding these should be part of your investment process.

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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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.