With EPS Growth And More, Kulicke and Soffa Industries (NASDAQ:KLIC) Is Interesting

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 Kulicke and Soffa Industries (NASDAQ:KLIC). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Kulicke and Soffa Industries

How Fast Is Kulicke and Soffa Industries 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Kulicke and Soffa Industries has grown EPS by 50% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Unfortunately, revenue is down and so are margins. That will not make it easy to grow profits, to say the least.

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

NasdaqGS:KLIC Income Statement, April 12th 2019
NasdaqGS:KLIC Income Statement, April 12th 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 Kulicke and Soffa Industries?

Are Kulicke and Soffa Industries Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.

It’s good to see Kulicke and Soffa Industries insiders walking the walk, by spending US$337k on shares in just twelve months. When you contrast that with the complete lack of sales, it’s easy for shareholders to brim with joyful expectancy. We also note that it was the Director, Peter Kong, who made the biggest single acquisition, paying US$134k for shares at about US$26.89 each.

Along with the insider buying, another encouraging sign for Kulicke and Soffa Industries is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$33m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that’s only about 2.1% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Kulicke and Soffa Industries Worth Keeping An Eye On?

Kulicke and Soffa Industries’s earnings have taken off like any random crypto-currency did, back in 2017. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. If that’s the case, you may regret neglecting to put Kulicke and Soffa Industries on your watchlist. Of course, just because Kulicke and Soffa Industries 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.

As a growth investor I do like to see insider buying. But Kulicke and Soffa Industries isn’t the only one. You can see a a free list of them here.

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.