Do DAE HWA Pharmaceutical's (KOSDAQ:067080) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in DAE HWA Pharmaceutical (KOSDAQ:067080). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for DAE HWA Pharmaceutical

How Quickly Is DAE HWA Pharmaceutical Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that DAE HWA Pharmaceutical has grown EPS by 45% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. The good news is that DAE HWA Pharmaceutical is growing revenues, and EBIT margins improved by 2.4 percentage points to 5.1%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since DAE HWA Pharmaceutical is no giant, with a market capitalization of ₩254b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are DAE HWA Pharmaceutical 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 DAE HWA Pharmaceutical insiders have a significant amount of capital invested in the stock. With a whopping ₩76b worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 30% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Should You Add DAE HWA Pharmaceutical To Your Watchlist?

DAE HWA Pharmaceutical'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. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind DAE HWA Pharmaceutical is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that DAE HWA Pharmaceutical is showing 4 warning signs in our investment analysis , and 2 of those make us uncomfortable...

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.

If you’re looking to trade DAE HWA Pharmaceutical, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.