Is Now The Time To Put Karoon Energy (ASX:KAR) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Karoon Energy (ASX:KAR). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Karoon Energy

Karoon Energy's Improving Profits

Karoon Energy has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Karoon Energy's EPS skyrocketed from US$0.20 to US$0.31, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 54%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Karoon Energy shareholders can take confidence from the fact that EBIT margins are up from 42% to 51%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Karoon Energy?

Are Karoon Energy Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Karoon Energy shareholders can gain quiet confidence from the fact that insiders shelled out US$611k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by MD, CEO & Director Julian Fowles for AU$368k worth of shares, at about AU$2.05 per share.

Is Karoon Energy Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Karoon Energy's strong EPS growth. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. To put it succinctly; Karoon Energy is a strong candidate for your watchlist. Still, you should learn about the 3 warning signs we've spotted with Karoon Energy (including 2 which are concerning).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Karoon Energy, you'll probably love this curated collection of companies in AU that have witnessed growth alongside 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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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.