If EPS Growth Is Important To You, Kim Heng (Catalist:5G2) Presents An Opportunity

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kim Heng (Catalist:5G2). 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.

View our latest analysis for Kim Heng

How Fast Is Kim Heng Growing Its Earnings Per Share?

Over the last three years, Kim Heng 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. As a result, we'll zoom in on growth over the last year, instead. Kim Heng's EPS skyrocketed from S$0.004 to S$0.0057, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 43%.

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. EBIT margins for Kim Heng remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 29% to S$89m. 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.

Since Kim Heng is no giant, with a market capitalisation of S$54m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Kim Heng 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Kim Heng top brass are certainly in sync, not having sold any shares, over the last year. But more importantly, Executive Chairman & CEO Keng Siong Tan spent S$69k acquiring shares, doing so at an average price of S$0.086. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Should You Add Kim Heng To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Kim Heng's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. To put it succinctly; Kim Heng is a strong candidate for your watchlist. What about risks? Every company has them, and we've spotted 4 warning signs for Kim Heng you should know about.

The good news is that Kim Heng is not the only growth stock with insider buying. Here's a list of growth-focused companies in SG 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.