Do Shin Poong Pharm.Co.Ltd's (KRX:019170) Earnings Warrant Your Attention?

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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Shin Poong Pharm.Co.Ltd (KRX:019170). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

See our latest analysis for Shin Poong Pharm.Co.Ltd

How Fast Is Shin Poong Pharm.Co.Ltd Growing Its Earnings Per Share?

In the last three years Shin Poong Pharm.Co.Ltd'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. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Shin Poong Pharm.Co.Ltd's EPS soared from ₩73.44 to ₩107, in just one year. That's a impressive gain of 45%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Shin Poong Pharm.Co.Ltd's EBIT margins were flat over the last year, revenue grew by a solid 2.7% to ₩197b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Shin Poong Pharm.Co.Ltd's balance sheet strength, before getting too excited.

Are Shin Poong Pharm.Co.Ltd 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 Shin Poong Pharm.Co.Ltd insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at ₩68b, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.

Does Shin Poong Pharm.Co.Ltd Deserve A Spot On Your Watchlist?

You can't deny that Shin Poong Pharm.Co.Ltd has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. You still need to take note of risks, for example - Shin Poong Pharm.Co.Ltd has 3 warning signs we think you should be aware of.

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.

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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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