Here's Why Winpak (TSE:WPK) Has Caught The Eye Of Investors
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Winpak (TSE:WPK). 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.
View our latest analysis for Winpak
How Quickly Is Winpak Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Winpak has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Winpak reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
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.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Winpak?
Are Winpak 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Over the last 12 months Winpak insiders spent US$137k more buying shares than they received from selling them. Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. We also note that it was the Director, Martti Aarnio-Wihuri, who made the biggest single acquisition, paying CA$80k for shares at about CA$40.07 each.
It's reassuring that Winpak insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations between US$1.0b and US$3.2b, like Winpak, the median CEO pay is around US$2.1m.
Winpak offered total compensation worth US$1.2m to its CEO in the year to December 2022. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Winpak Deserve A Spot On Your Watchlist?
As previously touched on, Winpak is a growing business, which is encouraging. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. The sum of all that, points to a quality business, and a genuine prospect for further research. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Winpak is trading on a high P/E or a low P/E, relative to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Winpak, you'll probably love this curated collection of companies in CA that have witnessed growth 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.
