Do Kumulus Vape's (EPA:ALVAP) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

View our latest analysis for Kumulus Vape

How Fast Is Kumulus Vape Growing Its Earnings Per Share?

Kumulus Vape 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. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Kumulus Vape's EPS soared from €0.47 to €0.73, over the last year. That's a commendable gain of 55%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Kumulus Vape achieved similar EBIT margins to last year, revenue grew by a solid 61% to €56m. That's encouraging news for the company!

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 Kumulus Vape is no giant, with a market capitalisation of €21m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Kumulus Vape Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Kumulus Vape insiders own a meaningful share of the business. In fact, they own 37% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Kumulus Vape is a very small company, with a market cap of only €21m. So despite a large proportional holding, insiders only have €7.7m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Kumulus Vape Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Kumulus Vape's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. 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. However, before you get too excited we've discovered 3 warning signs for Kumulus Vape (1 shouldn't be ignored!) that you should be aware of.

The beauty of investing is that you can invest in almost 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. 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.