Does DSC Investment (KOSDAQ:241520) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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 contrast to all that, I prefer to spend time on companies like DSC Investment (KOSDAQ:241520), which has not only revenues, but also profits. 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. 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 DSC Investment

DSC Investment's Improving Profits

In the last three years DSC Investment'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. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, DSC Investment's EPS shot from ₩309 to ₩890, over the last year. Year on year growth of 188% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. Not all of DSC Investment's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. DSC Investment maintained stable EBIT margins over the last year, all while growing revenue 122% to ₩38b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

DSC Investment isn't a huge company, given its market capitalization of ₩178b. That makes it extra important to check on its balance sheet strength.

Are DSC Investment Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that DSC Investment insiders have a significant amount of capital invested in the stock. To be specific, they have ₩52b worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 29% of the company, demonstrating a degree of high-level alignment with shareholders.

Does DSC Investment Deserve A Spot On Your Watchlist?

DSC Investment's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind DSC Investment is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that DSC Investment is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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. 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.
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