If EPS Growth Is Important To You, Kongsberg Gruppen (OB:KOG) 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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kongsberg Gruppen (OB:KOG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Our analysis indicates that KOG is potentially undervalued!

How Fast Is Kongsberg Gruppen Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Kongsberg Gruppen has achieved impressive annual EPS growth of 41%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Kongsberg Gruppen achieved similar EBIT margins to last year, revenue grew by a solid 11% to kr29b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Kongsberg Gruppen's forecast profits?

Are Kongsberg Gruppen Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that Kongsberg Gruppen insiders spent kr1.5m on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Director, Morten Henriksen, who made the biggest single acquisition, paying kr657k for shares at about kr340 each.

Does Kongsberg Gruppen Deserve A Spot On Your Watchlist?

Kongsberg Gruppen's earnings per share have been soaring, with growth rates sky high. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put Kongsberg Gruppen on your watchlist. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Kongsberg Gruppen that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Kongsberg Gruppen isn't the only one. You can see a 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. 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.