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. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kongsberg Automotive (OB:KOA). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. 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.
Kongsberg Automotive’s Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Kongsberg Automotive’s stratospheric annual EPS growth of 52%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
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. Kongsberg Automotive shareholders can take confidence from the fact that EBIT margins are up from 2.8% to 4.8%, and revenue is growing. That’s great to see, on both counts.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Kongsberg Automotive Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Kongsberg Automotive insiders spent €1.5m on stock, over the last year; in contrast, we didn’t see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. We also note that it was the CEO & President, Henning Jensen, who made the biggest single acquisition, paying øre401k for shares at about øre8.02 each.
Is Kongsberg Automotive Worth Keeping An Eye On?
Kongsberg Automotive’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. If you’re like me, you’ll 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. For me, this situation certainly piques my interest. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Kongsberg Automotive is trading on a high P/E or a low P/E, relative to its industry.
As a growth investor I do like to see insider buying. But Kongsberg Automotive 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
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