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.
In contrast to all that, I prefer to spend time on companies like Kelly Partners Group Holdings (ASX:KPG), 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. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is Kelly Partners Group Holdings Growing Its Earnings Per Share?
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Kelly Partners Group Holdings boosted its trailing twelve month EPS from AU$0.084 to AU$0.10, in the last year. I doubt many would complain about that 23% gain.
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. The good news is that Kelly Partners Group Holdings is growing revenues, and EBIT margins improved by 2.1 percentage points to 28%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Kelly Partners Group Holdings isn't a huge company, given its market capitalization of AU$158m. That makes it extra important to check on its balance sheet strength.
Are Kelly Partners Group Holdings Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Kelly Partners Group Holdings insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 57%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have AU$90m invested in the business, using the current share price. That's nothing to sneeze at!
Should You Add Kelly Partners Group Holdings To Your Watchlist?
As I already mentioned, Kelly Partners Group Holdings is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 1 warning sign for Kelly Partners Group Holdings that you need to be mindful of.
Although Kelly Partners Group Holdings 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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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