Stock Analysis

With EPS Growth And More, ABOV Semiconductor (KOSDAQ:102120) Is Interesting

KOSDAQ:A102120
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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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like ABOV Semiconductor (KOSDAQ:102120), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

Check out our latest analysis for ABOV Semiconductor

ABOV Semiconductor's Improving Profits

In the last three years ABOV Semiconductor'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. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, ABOV Semiconductor's EPS shot from ₩528 to ₩1,303, over the last year. You don't see 147% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. ABOV Semiconductor shareholders can take confidence from the fact that EBIT margins are up from 7.7% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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

earnings-and-revenue-history
KOSDAQ:A102120 Earnings and Revenue History January 26th 2021

ABOV Semiconductor isn't a huge company, given its market capitalization of ₩268b. That makes it extra important to check on its balance sheet strength.

Are ABOV Semiconductor 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 ABOV Semiconductor insiders have a significant amount of capital invested in the stock. With a whopping ₩66b worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 24% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Should You Add ABOV Semiconductor To Your Watchlist?

ABOV Semiconductor's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering ABOV Semiconductor for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for ABOV Semiconductor 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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Valuation is complex, but we're helping make it simple.

Find out whether ABOV Semiconductor is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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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