Stock Analysis

With EPS Growth And More, Crown Confectionery (KRX:264900) Is Interesting

KOSE:A264900
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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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Crown Confectionery (KRX:264900). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Crown Confectionery

Crown Confectionery's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Like a falcon taking flight, Crown Confectionery's EPS soared from ₩1,022 to ₩1,472, over the last year. That's a commendable gain of 44%.

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. Crown Confectionery reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
KOSE:A264900 Earnings and Revenue History November 26th 2020

Crown Confectionery isn't a huge company, given its market capitalization of ₩109b. That makes it extra important to check on its balance sheet strength.

Are Crown Confectionery Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Crown Confectionery insiders have a significant amount of capital invested in the stock. To be specific, they have ₩24b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 22% of the company; visible skin in the game.

Does Crown Confectionery Deserve A Spot On Your Watchlist?

You can't deny that Crown Confectionery 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. You still need to take note of risks, for example - Crown Confectionery has 2 warning signs we think you should be aware of.

Although Crown Confectionery 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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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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