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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Korvest (ASX:KOV). 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.
Check out our latest analysis for Korvest
How Quickly Is Korvest Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Korvest has grown EPS by 56% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. The music to the ears of Korvest shareholders is that EBIT margins have grown from 10% to 15% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Korvest is no giant, with a market capitalisation of AU$81m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Korvest 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
In the last twelve months Korvest insiders spent AU$69k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Chairman Andrew Stobart for AU$32k worth of shares, at about AU$6.44 per share.
Is Korvest Worth Keeping An Eye On?
Korvest's earnings per share growth have been climbing higher at an appreciable rate. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. If that's the case, you may regret neglecting to put Korvest on your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Korvest (1 shouldn't be ignored) you should be aware of.
The good news is that Korvest 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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