Here's Why We Think Kinetik Holdings (NYSE:KNTK) Might Deserve Your Attention Today

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kinetik Holdings (NYSE:KNTK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Kinetik Holdings

How Fast Is Kinetik Holdings Growing Its Earnings Per Share?

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's an outstanding feat for Kinetik Holdings to have grown EPS from US$1.47 to US$4.76 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Kinetik Holdings achieved similar EBIT margins to last year, revenue grew by a solid 3.5% to US$1.3b. 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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Kinetik Holdings' future EPS 100% free.

Are Kinetik Holdings 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Although we did see some insider selling (worth US$846k) this was overshadowed by a mountain of buying, totalling US$2.5m in just one year. We find this encouraging because it suggests they are optimistic about Kinetik Holdings'future. Zooming in, we can see that the biggest insider purchase was by Independent Director Kevin McCarthy for US$1m worth of shares, at about US$31.50 per share.

Along with the insider buying, another encouraging sign for Kinetik Holdings is that insiders, as a group, have a considerable shareholding. Holding US$69m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.

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$1.0b and US$3.2b, is around US$4.9m.

The CEO of Kinetik Holdings only received US$1.3m in total compensation for the year ending December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Kinetik Holdings Worth Keeping An Eye On?

Kinetik Holdings' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are 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. We don't want to rain on the parade too much, but we did also find 3 warning signs for Kinetik Holdings (2 don't sit too well with us!) that you need to be mindful of.

The good news is that Kinetik Holdings is not the only growth stock with insider buying. Here's a list of growth-focused companies in the US 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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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.