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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kinetik Holdings (NYSE:KNTK). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kinetik Holdings with the means to add long-term value to shareholders.

How Fast Is Kinetik Holdings Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It's an outstanding feat for Kinetik Holdings to have grown EPS from US$0.82 to US$5.09 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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. While we note Kinetik Holdings achieved similar EBIT margins to last year, revenue grew by a solid 20% to US$1.4b. That's encouraging news for the company!

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Kinetik Holdings.

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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The US$1.5m worth of shares that insiders sold during the last 12 months pales in comparison to the US$2.5m 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.

The good news, alongside the insider buying, for Kinetik Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$310m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

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. The cherry on top is that the CEO, Jamie Welch is paid comparatively modestly to CEOs at similar sized companies. 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$7.9m.

Kinetik Holdings' CEO took home a total compensation package of US$2.3m in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Kinetik Holdings To Your Watchlist?

Kinetik Holdings' earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Kinetik Holdings belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 4 warning signs for Kinetik Holdings you should be aware of, and 1 of them shouldn't be ignored.

The good news is that Kinetik Holdings is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US 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.