Does Digital Imaging Technology (KOSDAQ:110990) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Digital Imaging Technology (KOSDAQ:110990). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Digital Imaging Technology

How Fast Is Digital Imaging Technology Growing Its Earnings Per Share?

Over the last three years, Digital Imaging Technology has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Digital Imaging Technology's EPS shot up from ₩508 to ₩718; a result that's bound to keep shareholders happy. That's a fantastic gain of 41%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Digital Imaging Technology's EBIT margins have actually improved by 3.9 percentage points in the last year, to reach 8.1%, but, on the flip side, revenue was down 19%. That's not a good look.

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.

Digital Imaging Technology isn't a huge company, given its market capitalisation of ₩353b. That makes it extra important to check on its balance sheet strength.

Are Digital Imaging Technology Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Digital Imaging Technology insiders own a significant number of shares certainly is appealing. In fact, they own 56% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₩198b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Digital Imaging Technology Worth Keeping An Eye On?

You can't deny that Digital Imaging Technology has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Digital Imaging Technology's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Even so, be aware that Digital Imaging Technology is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in KR with promising growth potential and insider confidence.

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.