With EPS Growth And More, Kingnet Network (SZSE:002517) Makes An Interesting Case

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 currently lacks a track record of revenue and profit. 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. 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.

In contrast to all that, many investors prefer to focus on companies like Kingnet Network (SZSE:002517), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Kingnet Network

How Fast Is Kingnet Network Growing Its Earnings Per Share?

Kingnet Network 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. So it would be better to isolate the growth rate over the last year for our analysis. Kingnet Network's EPS shot up from CN¥0.51 to CN¥0.76; a result that's bound to keep shareholders happy. That's a commendable gain of 48%.

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. While Kingnet Network did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Kingnet Network's future EPS 100% free.

Are Kingnet Network Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Kingnet Network insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth CN¥4.9b. That equates to 22% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Does Kingnet Network Deserve A Spot On Your Watchlist?

You can't deny that Kingnet Network has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Kingnet Network's continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. What about risks? Every company has them, and we've spotted 1 warning sign for Kingnet Network you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com