Stock Analysis

Here's Why I Think Kaiser Aluminum (NASDAQ:KALU) Is An Interesting Stock

  •  Updated
NasdaqGS:KALU
Source: Shutterstock

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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kaiser Aluminum (NASDAQ:KALU). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Kaiser Aluminum

How Fast Is Kaiser Aluminum Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Kaiser Aluminum's stratospheric annual EPS growth of 38%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. On the one hand, Kaiser Aluminum's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

NasdaqGS:KALU Income Statement, April 23rd 2019
NasdaqGS:KALU Income Statement, April 23rd 2019

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Kaiser Aluminum?

Are Kaiser Aluminum Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company, if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Kaiser Aluminum shares worth a considerable sum. To be specific, they have US$45m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Kaiser Aluminum Deserve A Spot On Your Watchlist?

Kaiser Aluminum's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Kaiser Aluminum is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because Kaiser Aluminum is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Although Kaiser Aluminum certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this freelist of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

About NasdaqGS:KALU

Kaiser Aluminum

Kaiser Aluminum Corporation engages in manufacture and sale of semi-fabricated specialty aluminum mill products in the United States and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth4
Past Performance0
Financial Health1
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Reasonable growth potential second-rate dividend payer.