If EPS Growth Is Important To You, Daidong Electronics (KRX:008110) Presents An Opportunity

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 currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Daidong Electronics (KRX:008110). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Daidong Electronics

How Fast Is Daidong Electronics Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Daidong Electronics' EPS went from ₩600 to ₩1,999 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. To cut to the chase Daidong Electronics' EBIT margins dropped last year, and so did its revenue. Shareholders will be hoping for a change in fortunes if they're looking for profit growth.

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.

Daidong Electronics isn't a huge company, given its market capitalisation of ₩110b. That makes it extra important to check on its balance sheet strength.

Are Daidong Electronics Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Daidong Electronics insiders own a meaningful share of the business. In fact, they own 43% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about ₩47b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Daidong Electronics To Your Watchlist?

Daidong Electronics' earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Daidong Electronics for a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Daidong Electronics (of which 1 can't be ignored!) you should know about.

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.