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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Korvest (ASX:KOV). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
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. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Korvest's EPS have grown from AU$0.35 to AU$0.42 over twelve months. That's a 21% gain; respectable growth in the broader scheme of things.
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). Unfortunately, Korvest's revenue dropped 7.8% last year, but the silver lining is that EBIT margins improved from 8.2% to 11%. That falls short of ideal.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Since Korvest is no giant, with a market capitalization of AU$45m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Korvest Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
We haven't seen any insiders selling Korvest shares, in the last year. With that in mind, it's heartening that Graeme Billings, the Independent Non-Executive Chairman of the company, paid AU$14k for shares at around AU$4.71 each.
Is Korvest Worth Keeping An Eye On?
As I already mentioned, Korvest is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Korvest seems free from that morose affliction. The icing on the cake is that an insider bought shares during the year, which inclines me to put this one on a watchlist. It is worth noting though that we have found 3 warning signs for Korvest that you need to take into consideration.
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.
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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. 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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