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Does Kimball International (NASDAQ:KBAL) Deserve A Spot On Your Watchlist?

Simply Wall St

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Kimball International (NASDAQ:KBAL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Kimball International

How Fast Is Kimball International Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Kimball International grew its EPS by 15% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Kimball International maintained stable EBIT margins over the last year, all while growing revenue 7.2% to US$775m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

NasdaqGS:KBAL Income Statement, December 5th 2019

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Kimball International's balance sheet strength, before getting too excited.

Are Kimball International Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Kimball International shares worth a considerable sum. Indeed, they hold US$28m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 3.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Kimball International Worth Keeping An Eye On?

One important encouraging feature of Kimball International is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Now, you could try to make up your mind on Kimball International by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Kimball International certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.