Is Now The Time To Put KLA (NASDAQ:KLAC) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like KLA (NASDAQ:KLAC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out the opportunities and risks within the US Semiconductor industry.

How Fast Is KLA 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) outcomes. That makes EPS growth an attractive quality for any company. KLA's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 48%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. The good news is that KLA is growing revenues, and EBIT margins improved by 2.8 percentage points to 40%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for KLA's future profits.

Are KLA Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$55b company like KLA. But we do take comfort from the fact that they are investors in the company. Holding US$87m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.

Does KLA Deserve A Spot On Your Watchlist?

KLA's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. 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 at the surface level, KLA is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Before you take the next step you should know about the 2 warning signs for KLA that we have uncovered.

The beauty of investing is that you can invest in almost 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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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.