Here's Why I Think Kandi Technologies Group (NASDAQ:KNDI) Might Deserve Your Attention Today

By
Simply Wall St
Published
November 08, 2021
NasdaqGS:KNDI
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Kandi Technologies Group (NASDAQ:KNDI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

View our latest analysis for Kandi Technologies Group

How Fast Is Kandi Technologies Group 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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Kandi Technologies Group managed to grow EPS by 4.5% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Unfortunately, revenue is down and so are margins. That is, not a hint of euphemism here, suboptimal.

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
NasdaqGS:KNDI Earnings and Revenue History November 9th 2021

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Kandi Technologies Group's balance sheet strength, before getting too excited.

Are Kandi Technologies Group Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Kandi Technologies Group insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at US$75m, they have plenty of motivation to push the business to succeed. That holding amounts to 19% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Kandi Technologies Group with market caps between US$200m and US$800m is about US$1.7m.

The CEO of Kandi Technologies Group only received US$220k in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of good governance, more generally.

Does Kandi Technologies Group Deserve A Spot On Your Watchlist?

As I already mentioned, Kandi Technologies Group is a growing business, which is what I like to see. Earnings growth might be the main game for Kandi Technologies Group, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. It is worth noting though that we have found 2 warning signs for Kandi Technologies Group (1 is significant!) that you need to take into consideration.

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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