Here's Why I Think Daesung Holdings (KRX:016710) Might Deserve Your Attention Today

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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Daesung Holdings (KRX:016710). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Daesung Holdings

Daesung Holdings's Improving Profits

In the last three years Daesung Holdings'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 a firecracker arcing through the night sky, Daesung Holdings's EPS shot from ₩1,066 to ₩2,843, over the last year. Year on year growth of 167% is certainly a sight to behold.

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. Daesung Holdings reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Daesung Holdings 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 Daesung Holdings insiders own a meaningful share of the business. In fact, they own 40% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have ₩173b invested in the business, using the current share price. That's nothing to sneeze at!

Does Daesung Holdings Deserve A Spot On Your Watchlist?

Daesung Holdings's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Daesung Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Now, you could try to make up your mind on Daesung Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

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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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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