Yahoo Finance If EPS Growth Is Important To You, Kelt Exploration (TSE:KEL) Presents An Opportunity
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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Kelt Exploration (TSE:KEL), which has not only revenues, but also profits. 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 Kelt Exploration
How Fast Is Kelt Exploration Growing Its Earnings Per Share?
Over the last three years, Kelt Exploration has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Kelt Exploration's EPS shot from CA$0.32 to CA$0.72, over the last year. Year on year growth of 129% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
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. Kelt Exploration shareholders can take confidence from the fact that EBIT margins are up from 33% to 37%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Kelt Exploration's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Kelt Exploration Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We do note that, in the last year, insiders sold CA$2.6m worth of shares. But that's far less than the CA$6.5m insiders spent purchasing stock. This adds to the interest in Kelt Exploration because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by CEO, President & Non-Independent Director David Wilson for CA$4.1m worth of shares, at about CA$5.31 per share.
Along with the insider buying, another encouraging sign for Kelt Exploration is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth CA$206m. That equates to 17% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Kelt Exploration's CEO, David Wilson, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between CA$517m and CA$2.1b, like Kelt Exploration, the median CEO pay is around CA$2.0m.
The CEO of Kelt Exploration only received CA$717k in total compensation for the year ending December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Kelt Exploration To Your Watchlist?
Kelt Exploration's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Kelt Exploration deserves timely attention. However, before you get too excited we've discovered 1 warning sign for Kelt Exploration that you should be aware of.
The good news is that Kelt Exploration 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.
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