Yahoo Finance Does Koss (NASDAQ:KOSS) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Koss (NASDAQ:KOSS). 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.
Check out our latest analysis for Koss
Koss' Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Koss' EPS has grown 21% each year, compound, over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.
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. Koss shareholders can take confidence from the fact that EBIT margins are up from -3.1% to 4.5%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Koss is no giant, with a market capitalisation of US$71m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Koss Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the US$140k that Independent Director William Sweasy spent buying shares (at an average price of about US$7.01). Purchases like this clue us in to the to the faith management has in the business' future.
It's commendable to see that insiders have been buying shares in Koss, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Koss with market caps under US$200m is about US$753k.
Koss offered total compensation worth US$549k to its CEO in the year to June 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Koss Worth Keeping An Eye On?
For growth investors, Koss' raw rate of earnings growth is a beacon in the night. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. All in all, this stock is worth the time to delve deeper into the details. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Koss that you should be aware of.
The good news is that Koss is not the only growth stock with insider buying. Here's a list of them... 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.
