With EPS Growth And More, Kewaunee Scientific (NASDAQ:KEQU) Makes An Interesting Case

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. 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. 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 Kewaunee Scientific (NASDAQ:KEQU). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kewaunee Scientific with the means to add long-term value to shareholders.

See our latest analysis for Kewaunee Scientific

Kewaunee Scientific's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Kewaunee Scientific to have grown EPS from US$0.26 to US$6.60 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.

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. We note that while EBIT margins have improved from 2.4% to 6.9%, the company has actually reported a fall in revenue by 7.2%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Kewaunee Scientific isn't a huge company, given its market capitalisation of US$126m. That makes it extra important to check on its balance sheet strength.

Are Kewaunee Scientific 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 Kewaunee Scientific insiders have a significant amount of capital invested in the stock. Indeed, they hold US$34m worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 27% of the company; visible skin in the game.

Should You Add Kewaunee Scientific To Your Watchlist?

Kewaunee Scientific's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Kewaunee Scientific for a spot on your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Kewaunee Scientific is trading on a high P/E or a low P/E, relative to its industry.

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 the US 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.