We Ran A Stock Scan For Earnings Growth And Kredyt Inkaso (WSE:KRI) Passed With Ease

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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kredyt Inkaso (WSE:KRI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kredyt Inkaso with the means to add long-term value to shareholders.

View our latest analysis for Kredyt Inkaso

How Quickly Is Kredyt Inkaso Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Kredyt Inkaso has achieved impressive annual EPS growth of 57%, 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. It's noted that Kredyt Inkaso's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Kredyt Inkaso shareholders is that EBIT margins have grown from 23% to 46% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Kredyt Inkaso isn't a huge company, given its market capitalisation of zł190m. That makes it extra important to check on its balance sheet strength.

Are Kredyt Inkaso Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Kredyt Inkaso with market caps under zł908m is about zł1.2m.

The Kredyt Inkaso CEO received total compensation of just zł287k in the year to March 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Kredyt Inkaso Deserve A Spot On Your Watchlist?

Kredyt Inkaso's earnings have taken off in quite an impressive fashion. Such fast EPS growth prompts the question: has the business reached an inflection point? What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. Even so, be aware that Kredyt Inkaso is showing 1 warning sign in our investment analysis , you should know about...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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

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.