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 currently lacks a track record of revenue and profit. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Keppel (SGX:BN4), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Fast Is Keppel Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Keppel has grown EPS by 42% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. The good news is that Keppel is growing revenues, and EBIT margins improved by 6.4 percentage points to 12%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
SGX:BN4 Earnings and Revenue History March 27th 2024
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Keppel?
Are Keppel 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's good to see Keppel insiders walking the walk, by spending S$658k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the Non-Executive & Non-Independent Chairman, Leong Kay Teoh, who made the biggest single acquisition, paying S$219k for shares at about S$6.45 each.
On top of the insider buying, it's good to see that Keppel insiders have a valuable investment in the business. Holding S$116m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
Is Keppel Worth Keeping An Eye On?
Keppel's earnings have taken off in quite an impressive fashion. 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 Keppel deserves timely attention. We don't want to rain on the parade too much, but we did also find 3 warning signs for Keppel (1 shouldn't be ignored!) that you need to be mindful of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Keppel, you'll probably love this curated collection of companies in SG that have witnessed growth alongside 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.