With EPS Growth And More, Dream Security (KOSDAQ:203650) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Dream Security (KOSDAQ:203650), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Dream Security

How Fast Is Dream Security Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Dream Security's stratospheric annual EPS growth of 56%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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). Dream Security maintained stable EBIT margins over the last year, all while growing revenue 302% to ₩120b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Since Dream Security is no giant, with a market capitalization of ₩218b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Dream Security Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Dream Security insiders own a significant number of shares certainly appeals to me. Actually, with 41% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about ₩90b riding on the stock, at current prices. That's nothing to sneeze at!

Is Dream Security Worth Keeping An Eye On?

Dream Security's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Dream Security for a spot on your watchlist. Even so, be aware that Dream Security is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Although Dream Security certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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