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 as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kulicke and Soffa Industries (NASDAQ:KLIC). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
Kulicke and Soffa Industries’s Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Kulicke and Soffa Industries’s EPS has grown 36% each year, compound, over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away winners.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). To cut to the chase Kulicke and Soffa Industries’s EBIT margins dropped last year, and so did its revenue. That is, not a hint of euphemism here, suboptimal.
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 Kulicke and Soffa Industries’s future profits.
Are Kulicke and Soffa Industries Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
First things first; I didn’t see insiders sell Kulicke and Soffa Industries shares in the last year. Even better, though, is that the Director, Peter Kong, bought a whopping US$431k worth of shares, paying about US$21.53 per share, on average. To me that means at least one insider thinks that the company is doing well – and they are backing that view with cash.
On top of the insider buying, it’s good to see that Kulicke and Soffa Industries insiders have a valuable investment in the business. Indeed, they hold US$33m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Does Kulicke and Soffa Industries Deserve A Spot On Your Watchlist?
You can’t deny that Kulicke and Soffa Industries has grown its earnings per share at a very impressive rate. That’s attractive. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So I do think this is one stock worth watching. If you think Kulicke and Soffa Industries might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
The good news is that Kulicke and Soffa Industries 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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