If EPS Growth Is Important To You, NKT (CPH:NKT) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 NKT (CPH:NKT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide NKT with the means to add long-term value to shareholders.

Check out our latest analysis for NKT

How Fast Is NKT Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that NKT grew its EPS from €0.22 to €1.20, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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. NKT shareholders can take confidence from the fact that EBIT margins are up from 1.2% to 3.8%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of NKT's forecast profits?

Are NKT Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

With strong conviction, NKT insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Chairman of the Board, Jens Peter Olsen, paid €1.2m to buy shares at an average price of €395. Strong buying like that could be a sign of opportunity.

Does NKT Deserve A Spot On Your Watchlist?

NKT's earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over NKT could be in your best interest. Before you take the next step you should know about the 1 warning sign for NKT that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, NKT isn't the only one. You can see a a free list of them here.

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.