Stock Analysis

Should You Be Adding Cuckoo Holdings (KRX:192400) To Your Watchlist Today?

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KOSE:A192400
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Cuckoo Holdings (KRX:192400). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Cuckoo Holdings

How Fast Is Cuckoo Holdings Growing Its Earnings Per Share?

Over the last three years, Cuckoo Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Cuckoo Holdings's EPS soared from ₩11,080 to ₩16,633, in just one year. That's a impressive gain of 50%.

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. Cuckoo Holdings shareholders can take confidence from the fact that EBIT margins are up from 13% to 17%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
KOSE:A192400 Earnings and Revenue History March 23rd 2021

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Cuckoo Holdings Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Cuckoo Holdings insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 77%, 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. At the current share price, that insider holding is worth a whopping ₩657b. Now that's what I call some serious skin in the game!

Should You Add Cuckoo Holdings To Your Watchlist?

You can't deny that Cuckoo Holdings has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. 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. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Cuckoo Holdings , and understanding these should be part of your investment process.

You can invest in 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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About KOSE:A192400

Cuckoo Holdings

Cuckoo Holdings Co., Ltd., together with its subsidiaries, manufactures and sells kitchen appliances.

Flawless balance sheet average dividend payer.

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