If EPS Growth Is Important To You, Eastman Kodak (NYSE:KODK) Presents An Opportunity

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. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Eastman Kodak (NYSE:KODK). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Eastman Kodak

Eastman Kodak's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Eastman Kodak grew its EPS from US$0.16 to US$0.70, in one short 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. Eastman Kodak's EBIT margins have actually improved by 8.9 percentage points in the last year, to reach 15%, but, on the flip side, revenue was down 7.3%. 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. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Eastman Kodak's balance sheet strength, before getting too excited.

Are Eastman Kodak Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that Eastman Kodak insiders spent US$102k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Director, Michael Sileck, who made the biggest single acquisition, paying US$66k for shares at about US$4.39 each.

The good news, alongside the insider buying, for Eastman Kodak bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$31m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.3% of the company; visible skin in the game.

Is Eastman Kodak Worth Keeping An Eye On?

Eastman Kodak's earnings have taken off in quite an impressive fashion. 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 Eastman Kodak belongs near the top of your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Eastman Kodak (at least 1 which is concerning) , and understanding them should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Eastman Kodak isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider buying.

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.