If You Like EPS Growth Then Check Out Zaklady Urzadzen Kotlowych Staporków (WSE:ZUK) 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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Zaklady Urzadzen Kotlowych Staporków (WSE:ZUK). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Zaklady Urzadzen Kotlowych Staporków

Zaklady Urzadzen Kotlowych Staporków's Improving Profits

In the last three years Zaklady Urzadzen Kotlowych Staporków'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. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, Zaklady Urzadzen Kotlowych Staporków's EPS soared from zł0.24 to zł0.40, over the last year. That's a commendable gain of 67%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While Zaklady Urzadzen Kotlowych Staporków may have maintained EBIT margins over the last year, revenue has fallen. And that does make me a little more cautious of the stock.

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

Zaklady Urzadzen Kotlowych Staporków isn't a huge company, given its market capitalization of zł29m. That makes it extra important to check on its balance sheet strength.

Are Zaklady Urzadzen Kotlowych Staporków Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Zaklady Urzadzen Kotlowych Staporków insiders own a significant number of shares certainly appeals to me. In fact, they own 42% 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. Valued at only zł29m Zaklady Urzadzen Kotlowych Staporków is really small for a listed company. That means insiders only have zł12m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations under zł756m, like Zaklady Urzadzen Kotlowych Staporków, the median CEO pay is around zł542k.

Zaklady Urzadzen Kotlowych Staporków offered total compensation worth zł301k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Zaklady Urzadzen Kotlowych Staporków To Your Watchlist?

For growth investors like me, Zaklady Urzadzen Kotlowych Staporków's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that Zaklady Urzadzen Kotlowych Staporków is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 4 warning signs for Zaklady Urzadzen Kotlowych Staporków (1 is a bit concerning!) that you need to be mindful of.

Although Zaklady Urzadzen Kotlowych Staporków 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.

If you decide to trade Zaklady Urzadzen Kotlowych Staporków, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.