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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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). 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 Fast Is Winpak Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Winpak managed to grow EPS by 11% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. Despite consistency in EBIT margins year on year, Winpak has actually recorded a dip in revenue. While this may raise concerns, investors should investigate the reasoning behind this.
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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Winpak's future profits.
Are Winpak 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. 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.
We note that Winpak insiders spent US$229k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Chief Operational Excellence Randall Troutman for CA$103k worth of shares, at about CA$41.38 per share.
It's commendable to see that insiders have been buying shares in Winpak, but there is more evidence of shareholder friendly management. 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$2.2m.
The Winpak CEO received US$1.5m in compensation for the year ending December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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 there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. The sum of all that, points to a quality business, and a genuine prospect for further research. Now, you could try to make up your mind on Winpak by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Keen growth investors love to see insider activity. Thankfully, Winpak isn't the only one. You can see a a curated list of Canadian companies which have exhibited consistent growth accompanied by high insider ownership.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com