If You Like EPS Growth Then Check Out Kobay Technology Bhd (KLSE:KOBAY) Before It's Too Late

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. 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 Kobay Technology Bhd (KLSE:KOBAY), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Kobay Technology Bhd

How Quickly Is Kobay Technology Bhd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that Kobay Technology Bhd has grown EPS by 40% per year, 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.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Unfortunately, Kobay Technology Bhd's revenue dropped 20% last year, but the silver lining is that EBIT margins improved from 15% to 17%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Kobay Technology Bhd is no giant, with a market capitalization of RM1.1b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kobay Technology Bhd Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Kobay Technology Bhd insiders have a significant amount of capital invested in the stock. Indeed, they hold RM200m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 19% of the company; visible skin in the game.

Is Kobay Technology Bhd Worth Keeping An Eye On?

Kobay Technology Bhd's earnings have taken off like any random crypto-currency did, back in 2017. 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 Kobay Technology Bhd is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Kobay Technology Bhd is showing 1 warning sign in our investment analysis , you should know about...

Although Kobay Technology Bhd 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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