If You Like EPS Growth Then Check Out KPX HoldingsLtd (KRX:092230) Before It's Too Late

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

In contrast to all that, I prefer to spend time on companies like KPX HoldingsLtd (KRX:092230), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for KPX HoldingsLtd

How Quickly Is KPX HoldingsLtd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud KPX HoldingsLtd's stratospheric annual EPS growth of 39%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. Unfortunately, KPX HoldingsLtd's revenue dropped 4.2% last year, but the silver lining is that EBIT margins improved from 4.4% to 7.1%. That's not ideal.

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

KPX HoldingsLtd isn't a huge company, given its market capitalization of ₩281b. That makes it extra important to check on its balance sheet strength.

Are KPX HoldingsLtd 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. As a result, I'm encouraged by the fact that insiders own KPX HoldingsLtd shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at ₩96b, they have plenty of motivation to push the business to succeed. That holding amounts to 34% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Is KPX HoldingsLtd Worth Keeping An Eye On?

KPX HoldingsLtd's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind KPX HoldingsLtd is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 4 warning signs for KPX HoldingsLtd (1 shouldn't be ignored!) that you should be aware of before investing here.

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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