Here's Why I Think EXEM (KOSDAQ:205100) Is An Interesting Stock

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.

So if you're like me, you might be more interested in profitable, growing companies, like EXEM (KOSDAQ:205100). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 EXEM

EXEM's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud EXEM's stratospheric annual EPS growth of 54%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that EXEM is growing revenues, and EBIT margins improved by 14.0 percentage points to 27%, over the last year. That's great to see, on both counts.

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

EXEM isn't a huge company, given its market capitalization of ₩140b. That makes it extra important to check on its balance sheet strength.

Are EXEM 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 we're pleased to report that EXEM insiders own a meaningful share of the business. Actually, with 39% 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. In terms of absolute value, insiders have ₩55b invested in the business, using the current share price. That's nothing to sneeze at!

Is EXEM Worth Keeping An Eye On?

EXEM's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. 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 EXEM for a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for EXEM that we have uncovered.

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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