Here's Why I Think Kredyt Inkaso (WSE:KRI) Might Deserve Your Attention Today

By
Simply Wall St
Published
April 15, 2022
WSE:KRI
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Kredyt Inkaso (WSE:KRI), 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Kredyt Inkaso

Kredyt Inkaso'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. It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Kredyt Inkaso's stratospheric annual EPS growth of 57%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. Not all of Kredyt Inkaso's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. The good news is that Kredyt Inkaso is growing revenues, and EBIT margins improved by 23.5 percentage points to 46%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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

earnings-and-revenue-history
WSE:KRI Earnings and Revenue History April 15th 2022

Kredyt Inkaso isn't a huge company, given its market capitalization of zł223m. That makes it extra important to check on its balance sheet strength.

Are Kredyt Inkaso Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalizations under zł859m, like Kredyt Inkaso, the median CEO pay is around zł524k.

Kredyt Inkaso offered total compensation worth zł287k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Kredyt Inkaso Worth Keeping An Eye On?

Kredyt Inkaso's earnings have taken off like any random crypto-currency did, back in 2017. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay reassures me a little, since it points to an absence profligacy. So Kredyt Inkaso looks like it could be a good quality growth stock, at first glance. That's worth watching. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Kredyt Inkaso that you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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