Should You Be Adding Kepler Weber (BVMF:KEPL3) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kepler Weber (BVMF:KEPL3). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Kepler Weber

Kepler Weber's Improving Profits

In the last three years Kepler Weber'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. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, Kepler Weber's EPS soared from R$1.72 to R$2.58, over the last year. That's a commendable gain of 51%.

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. This approach makes Kepler Weber look pretty good, on balance; although revenue is flattish, EBIT margins improved from 10% to 15% in the last year. That's something to smile about.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Since Kepler Weber is no giant, with a market capitalization of R$987m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kepler Weber 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 Kepler Weber insiders have a significant amount of capital invested in the stock. Indeed, they hold R$128m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 13% of the company; visible skin in the game.

Should You Add Kepler Weber To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Kepler Weber's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. However, before you get too excited we've discovered 1 warning sign for Kepler Weber that you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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. 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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