Does Seoyon E-Hwa (KRX:200880) Deserve A Spot On Your Watchlist?

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 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.

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 Seoyon E-Hwa (KRX:200880). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Seoyon E-Hwa with the means to add long-term value to shareholders.

Check out our latest analysis for Seoyon E-Hwa

Seoyon E-Hwa's Improving Profits

Seoyon E-Hwa 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. Outstandingly, Seoyon E-Hwa's EPS shot from ₩3,549 to ₩6,374, over the last year. Year on year growth of 80% is certainly a sight to behold.

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. EBIT margins for Seoyon E-Hwa remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to ₩3.9t. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Seoyon E-Hwa is no giant, with a market capitalisation of ₩323b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Seoyon E-Hwa 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. So it is good to see that Seoyon E-Hwa insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at ₩27b. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.4% of the company; visible skin in the game.

Does Seoyon E-Hwa Deserve A Spot On Your Watchlist?

Seoyon E-Hwa's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Seoyon E-Hwa for a spot on your watchlist. You still need to take note of risks, for example - Seoyon E-Hwa has 2 warning signs (and 1 which doesn't sit too well with us) we think 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 KR 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.