We Ran A Stock Scan For Earnings Growth And Kingsmen Creatives (SGX:5MZ) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kingsmen Creatives (SGX:5MZ). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Fast Is Kingsmen Creatives Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Kingsmen Creatives' EPS went from S$0.017 to S$0.067 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.

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. Kingsmen Creatives' EBIT margins are flat but, worryingly, its revenue is actually down. While this may raise concerns, investors should investigate the reasoning behind this.

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.

Check out our latest analysis for Kingsmen Creatives

Since Kingsmen Creatives is no giant, with a market capitalisation of S$85m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Kingsmen Creatives Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Kingsmen Creatives insiders have a significant amount of capital invested in the stock. To be specific, they have S$19m worth of shares. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 23% of the shares on issue for the business, an appreciable amount considering the market cap.

Does Kingsmen Creatives Deserve A Spot On Your Watchlist?

Kingsmen Creatives' earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Kingsmen Creatives is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Still, you should learn about the 3 warning signs we've spotted with Kingsmen Creatives.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in SG with promising growth potential and insider confidence.

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.