We Ran A Stock Scan For Earnings Growth And Kits Eyecare (TSE:KITS) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Kits Eyecare (TSE:KITS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kits Eyecare with the means to add long-term value to shareholders.

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How Fast Is Kits Eyecare Growing Its Earnings Per Share?

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Kits Eyecare's EPS went from CA$0.0076 to CA$0.12 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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. Kits Eyecare shareholders can take confidence from the fact that EBIT margins are up from -0.3% to 3.8%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our 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.

View our latest analysis for Kits Eyecare

Fortunately, we've got access to analyst forecasts of Kits Eyecare's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Kits Eyecare Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Kits Eyecare followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Holding CA$130m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. Amounting to 23% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Kits Eyecare, with market caps between CA$279m and CA$1.1b, is around CA$1.4m.

Kits Eyecare's CEO took home a total compensation package of CA$586k in the year prior to December 2024. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Kits Eyecare Worth Keeping An Eye On?

Kits Eyecare's earnings per share have been soaring, with growth rates sky high. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that Kits Eyecare is worth considering carefully. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Kits Eyecare shapes up to industry peers, when it comes to ROE.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Canadian companies which have demonstrated growth backed by significant insider holdings.

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.