The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Kinetik Holdings (NYSE:KNTK). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is Kinetik Holdings Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. Commendations have to be given in seeing that Kinetik Holdings grew its EPS from US$1.47 to US$4.56, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Kinetik Holdings achieved similar EBIT margins to last year, revenue grew by a solid 3.5% to US$1.3b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Kinetik Holdings' future EPS 100% free.
Are Kinetik Holdings 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The US$1.5m worth of shares that insiders sold during the last 12 months pales in comparison to the US$2.8m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about Kinetik Holdings'future. We also note that it was the Independent Director, Kevin McCarthy, who made the biggest single acquisition, paying US$1m for shares at about US$31.50 each.
On top of the insider buying, it's good to see that Kinetik Holdings insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$207m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Kinetik Holdings' CEO, Jamie Welch, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Kinetik Holdings with market caps between US$4.0b and US$12b is about US$8.5m.
The CEO of Kinetik Holdings only received US$2.3m in total compensation for the year ending December 2023. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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.
Is Kinetik Holdings Worth Keeping An Eye On?
Kinetik Holdings' earnings have taken off in quite an impressive fashion. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Kinetik Holdings deserves timely attention. We should say that we've discovered 4 warning signs for Kinetik Holdings (1 is concerning!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Kinetik Holdings, you'll probably love this curated collection of companies in the US 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.