Should You Be Adding Korvest (ASX:KOV) To Your Watchlist Today?

Simply Wall St
December 03, 2021
Source: Shutterstock

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

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. 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 Korvest

Korvest's Improving Profits

In the last three years Korvest'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 falcon taking flight, Korvest's EPS soared from AU$0.36 to AU$0.53, over the last year. That's a commendable gain of 47%.

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. 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.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

ASX:KOV Earnings and Revenue History December 3rd 2021

Since Korvest is no giant, with a market capitalization of AU$78m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Korvest Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

In the last twelve months Korvest insiders spent AU$63k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. We also note that it was the Independent Non-Executive Chairman, Andrew Stobart, who made the biggest single acquisition, paying AU$32k for shares at about AU$6.44 each.

Does Korvest Deserve A Spot On Your Watchlist?

For growth investors like me, Korvest's raw rate of earnings growth is a beacon in the night. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. So on this analysis I believe Korvest is probably worth spending some time on. It is worth noting though that we have found 2 warning signs for Korvest that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Korvest, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.