Stock Analysis

Here's Why I Think Paseco (KOSDAQ:037070) Might Deserve Your Attention Today

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KOSDAQ:A037070
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Paseco (KOSDAQ:037070). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Paseco

Paseco's Improving Profits

In the last three years Paseco's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Paseco's EPS soared from ₩770 to ₩969, in just one year. That's a impressive gain of 26%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Paseco is growing revenues, and EBIT margins improved by 2.3 percentage points to 8.7%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
KOSDAQ:A037070 Earnings and Revenue History December 21st 2020

Paseco isn't a huge company, given its market capitalization of ₩169b. That makes it extra important to check on its balance sheet strength.

Are Paseco Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Paseco insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 79%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about ₩133b riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Paseco To Your Watchlist?

You can't deny that Paseco has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Now, you could try to make up your mind on Paseco by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Paseco certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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About KOSDAQ:A037070

Paseco

Paseco Co. Ltd manufactures and sells water appliances, heaters, and commercial and home appliances primarily in Korea.

Adequate balance sheet with poor track record.

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