I Ran A Stock Scan For Earnings Growth And KCI Spolka Akcyjna (WSE:KCI) Passed With Ease

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. 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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like KCI Spolka Akcyjna (WSE:KCI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for KCI Spolka Akcyjna

How Fast Is KCI Spolka Akcyjna Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that KCI Spolka Akcyjna's EPS went from zł0.15 to zł1.37 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. I note that KCI Spolka Akcyjna's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note KCI Spolka Akcyjna's EBIT margins were flat over the last year, revenue grew by a solid 4.3% to zł104m. That's a real positive.

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.

Since KCI Spolka Akcyjna is no giant, with a market capitalization of zł61m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are KCI Spolka Akcyjna 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 zł851m, like KCI Spolka Akcyjna, the median CEO pay is around zł529k.

The CEO of KCI Spolka Akcyjna was paid just zł49k in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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.

Is KCI Spolka Akcyjna Worth Keeping An Eye On?

KCI Spolka Akcyjna's earnings per share have taken off like a rocket aimed right at the moon. 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. While I couldn't be sure without a deeper dive, it does seem that KCI Spolka Akcyjna has the hallmarks of a quality business; and that would make it well worth watching. We should say that we've discovered 3 warning signs for KCI Spolka Akcyjna (1 is potentially serious!) that you should be aware of before investing here.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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.

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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.