Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. 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 LPKF Laser & Electronics (ETR:LPK), which has not only revenues, but also profits. While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for LPKF Laser & Electronics
How Fast Is LPKF Laser & Electronics Growing Its Earnings Per Share?
In the last three years LPKF Laser & Electronics’s earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn’t tell us much. As a result, I’ll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, LPKF Laser & Electronics’s EPS soared from €0.35 to €0.54, in just one year. That’s a impressive gain of 54%.
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. LPKF Laser & Electronics shareholders can take confidence from the fact that EBIT margins are up from 7.5% to 13%, and revenue is growing. 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. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for LPKF Laser & Electronics.
Are LPKF Laser & Electronics Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that LPKF Laser & Electronics insiders have a significant amount of capital invested in the stock. To be specific, they have €42m worth of shares. That’s a lot of money, and no small incentive to work hard. Those holdings account for over 11% of the company; visible skin in the game.
It’s good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I’d say they are indeed. I discovered that the median total compensation for the CEOs of companies like LPKF Laser & Electronics with market caps between €185m and €742m is about €1.0m.
The CEO of LPKF Laser & Electronics only received €364k in total compensation for the year ending . That’s clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn’t a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I’d also argue reasonable pay levels attest to good decision making more generally.
Should You Add LPKF Laser & Electronics To Your Watchlist?
You can’t deny that LPKF Laser & Electronics has grown its earnings per share at a very impressive rate. That’s attractive. If you need more convincing beyond that EPS growth rate, don’t forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that LPKF Laser & Electronics is worth keeping an eye on. It is worth noting though that we have found 2 warning signs for LPKF Laser & Electronics that you need to take into consideration.
Although LPKF Laser & Electronics certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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