For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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. 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.
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 Australian Agricultural Projects (ASX:AAP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Australian Agricultural Projects with the means to add long-term value to shareholders.
How Fast Is Australian Agricultural Projects Growing Its Earnings Per Share?
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. In impressive fashion, Australian Agricultural Projects' EPS grew from AU$0.0018 to AU$0.0034, over the previous 12 months. It's not often a company can achieve year-on-year growth of 94%. The best case scenario? That the business has hit a true inflection point.
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. The music to the ears of Australian Agricultural Projects shareholders is that EBIT margins have grown from 12% to 29% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
ASX:AAP Earnings and Revenue History February 24th 2025
Since Australian Agricultural Projects is no giant, with a market capitalisation of AU$17m, you should definitely check its cash and debtbefore getting too excited about its prospects.
Are Australian Agricultural Projects 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.
Insiders both bought and sold Australian Agricultural Projects shares in the last year, but the good news is they spent AU$45k more buying than they netted selling. So, on balance, the insider transactions are mildly encouraging. It is also worth noting that it was Non Executive Director Daniel Stefanetti who made the biggest single purchase, worth AU$2.0m, paying AU$0.042 per share.
On top of the insider buying, we can also see that Australian Agricultural Projects insiders own a large chunk of the company. In fact, they own 54% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Australian Agricultural Projects being valued at AU$17m, this is a small company we're talking about. That means insiders only have AU$9.1m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Australian Agricultural Projects' CEO, Paul Challis, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Australian Agricultural Projects with market caps under AU$314m is about AU$452k.
Australian Agricultural Projects' CEO took home a total compensation package of AU$164k in the year prior to June 2024. First impressions seem to indicate a compensation policy that is favourable to shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Should You Add Australian Agricultural Projects To Your Watchlist?
Australian Agricultural Projects' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Australian Agricultural Projects belongs near the top of your watchlist. You still need to take note of risks, for example - Australian Agricultural Projects has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.
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.
