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 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like K3 Capital Group (LON:K3C). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for K3 Capital Group
How Quickly Is K3 Capital Group 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, K3 Capital Group has grown EPS by 11% per year. That's a pretty good rate, if the company can sustain it.
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. K3 Capital Group maintained stable EBIT margins over the last year, all while growing revenue 50% to UK£71m. That's a real positive.
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 K3 Capital Group's future profits.
Are K3 Capital Group 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Despite some K3 Capital Group insiders disposing of some shares, we note that there was UK£111k more in buying interest among those who know the company best Shareholders who may have questioned insiders selling will find some reassurance in this fact. We also note that it was the Executive Vice Chairman, Anthony Ford, who made the biggest single acquisition, paying UK£46k for shares at about UK£3.10 each.
Along with the insider buying, another encouraging sign for K3 Capital Group is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at UK£47m, they have plenty of motivation to push the business to succeed. At 27% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
Does K3 Capital Group Deserve A Spot On Your Watchlist?
One important encouraging feature of K3 Capital Group is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. You should always think about risks though. Case in point, we've spotted 1 warning sign for K3 Capital Group you should be aware of.
The good news is that K3 Capital Group is not the only growth stock with insider buying. Here's a list of them... with 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.
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