Does Kinetik Holdings (NYSE:KNTK) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Kinetik Holdings (NYSE:KNTK), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Kinetik Holdings

Kinetik Holdings' Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. It is awe-striking that Kinetik Holdings' EPS went from US$0.82 to US$5.09 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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. While we note Kinetik Holdings achieved similar EBIT margins to last year, revenue grew by a solid 20% to US$1.4b. That's encouraging news for the company!

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.

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

Are Kinetik Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The US$1.5m worth of shares that insiders sold during the last 12 months pales in comparison to the US$2.5m they spent on acquiring shares in the company. This bodes well for Kinetik Holdings as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Independent Director Kevin McCarthy who made the biggest single purchase, worth US$1m, paying US$31.50 per share.

The good news, alongside the insider buying, for Kinetik Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth US$316m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Jamie Welch, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Kinetik Holdings, with market caps between US$4.0b and US$12b, is around US$7.8m.

Kinetik Holdings' CEO took home a total compensation package of US$2.3m in the year prior to December 2023. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Kinetik Holdings To Your Watchlist?

Kinetik Holdings' earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Kinetik Holdings belongs near the top of your watchlist. Still, you should learn about the 4 warning signs we've spotted with Kinetik Holdings (including 1 which doesn't sit too well with us).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Kinetik Holdings, you'll probably love this curated collection of companies in the US that have an attractive valuation alongside 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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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.