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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like Korvest (ASX:KOV), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is Korvest Growing Its Earnings Per Share?
Over the last three years, Korvest has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, Korvest's EPS soared from AU$0.36 to AU$0.54, over the last year. That's a commendable gain of 49%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Korvest is growing revenues, and EBIT margins improved by 3.5 percentage points to 13%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Korvest isn't a huge company, given its market capitalization of AU$61m. That makes it extra important to check on its balance sheet strength.
Are Korvest Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news for Korvest shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Gary Francis, the Independent Non Executive Director of the company, paid AU$11k for shares at around AU$4.11 each.
Should You Add Korvest To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Korvest's strong EPS growth. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; Korvest is a strong candidate for your watchlist. Before you take the next step you should know about the 3 warning signs for Korvest that we have uncovered.
As a growth investor I do like to see insider buying. But Korvest 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.
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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