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Is Now The Time To Put Winpak (TSE:WPK) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Winpak (TSE:WPK). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Winpak with the means to add long-term value to shareholders.

Check out our latest analysis for Winpak

Winpak's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Winpak's EPS shot up from US$1.56 to US$1.96; a result that's bound to keep shareholders happy. That's a commendable gain of 26%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Winpak maintained stable EBIT margins over the last year, all while growing revenue 25% to US$1.2b. That's a real positive.

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.


Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Winpak.

Are Winpak Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news is that Winpak insiders spent a whopping US$2.8m on stock in just one year, without so much as a single sale. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. It is also worth noting that it was Chairman of the Board Antti Aarnio-Wihuri who made the biggest single purchase, worth CA$1.9m, paying CA$37.60 per share.

It's reassuring that Winpak insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations between US$1.0b and US$3.2b, like Winpak, the median CEO pay is around US$2.3m.

The Winpak CEO received total compensation of just US$825k in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Winpak Worth Keeping An Eye On?

You can't deny that Winpak has grown its earnings per share at a very impressive rate. That's attractive. To add to the positives, Winpak has recorded instances of insider buying and a modest executive pay to boot. The overriding message from this quick rundown is yes, this stock is worth investigating further. Of course, just because Winpak is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Keen growth investors love to see insider buying. Thankfully, Winpak isn't the only one. You can see a 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.

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