Here's Why Keppel (SGX:BN4) Has Caught The Eye Of Investors

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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Keppel (SGX:BN4). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Keppel with the means to add long-term value to shareholders.

See our latest analysis for Keppel

How Fast Is Keppel Growing?

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. It certainly is nice to see that Keppel has managed to grow EPS by 17% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Keppel shareholders is that EBIT margins have grown from -8.7% to -1.8% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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

Are Keppel Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Shareholders in Keppel will be more than happy to see insiders committing themselves to the company, spending S$499k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. Zooming in, we can see that the biggest insider purchase was by Non-Executive & Non-Independent Chairman Leong Kay Teoh for S$171k worth of shares, at about S$6.83 per share.

Along with the insider buying, another encouraging sign for Keppel is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at S$75m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Is Keppel Worth Keeping An Eye On?

For growth investors, Keppel's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. We don't want to rain on the parade too much, but we did also find 3 warning signs for Keppel (1 makes us a bit uncomfortable!) that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Keppel, you'll probably love this free list of growing companies that insiders are buying.

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.