Here's Why I Think Kongsberg Gruppen (OB:KOG) 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. 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 Kongsberg Gruppen (OB:KOG), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Kongsberg Gruppen

Kongsberg Gruppen's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Kongsberg Gruppen has managed to grow EPS by 28% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Unfortunately, Kongsberg Gruppen's revenue dropped 4.4% last year, but the silver lining is that EBIT margins improved from 4.5% to 8.9%. That's not ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Kongsberg Gruppen?

Are Kongsberg Gruppen Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's good to see Kongsberg Gruppen insiders walking the walk, by spending kr3.8m on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by President & CEO Geir Haoy for kr855k worth of shares, at about kr180 per share.

Is Kongsberg Gruppen Worth Keeping An Eye On?

You can't deny that Kongsberg Gruppen has grown its earnings per share at a very impressive rate. That's attractive. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; Kongsberg Gruppen is a strong candidate for your watchlist. Before you take the next step you should know about the 1 warning sign for Kongsberg Gruppen that we have uncovered.

The good news is that Kongsberg Gruppen is not the only growth stock with insider buying. Here's a list of them... 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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