Here's Why I Think Kopla (KOSDAQ:126600) Is An Interesting Stock

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 Kopla (KOSDAQ:126600). 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 Kopla

Kopla's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Kopla has grown EPS by 32% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Kopla's EBIT margins have actually improved by 2.7 percentage points in the last year, to reach 7.6%, but, on the flip side, revenue was down 17%. That's not ideal.

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.

Since Kopla is no giant, with a market capitalization of ₩114b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kopla 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 we're pleased to report that Kopla insiders own a meaningful share of the business. In fact, they own 36% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have ₩41b invested in the business, using the current share price. That's nothing to sneeze at!

Should You Add Kopla To Your Watchlist?

For growth investors like me, Kopla's raw rate of earnings growth is a beacon in the night. 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. We don't want to rain on the parade too much, but we did also find 3 warning signs for Kopla (1 is a bit unpleasant!) that you need to be mindful of.

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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