Here's Why We Think Micro Contact Solution (KOSDAQ:098120) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Micro Contact Solution (KOSDAQ:098120). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Micro Contact Solution with the means to add long-term value to shareholders.

View our latest analysis for Micro Contact Solution

Micro Contact Solution's Improving Profits

Micro Contact Solution has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Over the last year, Micro Contact Solution increased its EPS from ₩848 to ₩890. That's a modest gain of 5.0%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Micro Contact Solution remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.2% to ₩65b. That's encouraging news for the company!

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.

Micro Contact Solution isn't a huge company, given its market capitalisation of ₩89b. That makes it extra important to check on its balance sheet strength.

Are Micro Contact Solution Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Micro Contact Solution shares worth a considerable sum. As a matter of fact, their holding is valued at ₩18b. That's a lot of money, and no small incentive to work hard. That amounts to 20% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Micro Contact Solution Deserve A Spot On Your Watchlist?

One positive for Micro Contact Solution is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 2 warning signs for Micro Contact Solution that you should be aware of.

Although Micro Contact Solution certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of South Korean companies that not only boast of strong growth but have also seen recent insider buying..

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.