Does Kulicke and Soffa Industries (NASDAQ:KLIC) Deserve A Spot On Your Watchlist?
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.
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 Kulicke and Soffa Industries (NASDAQ:KLIC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kulicke and Soffa Industries with the means to add long-term value to shareholders.
Check out our latest analysis for Kulicke and Soffa Industries
How Fast Is Kulicke and Soffa Industries Growing Its Earnings Per Share?
Kulicke and Soffa Industries has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Kulicke and Soffa Industries' EPS shot up from US$5.90 to US$7.60; a result that's bound to keep shareholders happy. That's a fantastic gain of 29%.
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. This approach makes Kulicke and Soffa Industries look pretty good, on balance; although revenue is flattish, EBIT margins improved from 27% to 31% in the last year. Which is a great look for the company.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Kulicke and Soffa Industries' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Kulicke and Soffa Industries Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Kulicke and Soffa Industries followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at US$81m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
Does Kulicke and Soffa Industries Deserve A Spot On Your Watchlist?
For growth investors, Kulicke and Soffa Industries' raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Kulicke and Soffa Industries' continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You should always think about risks though. Case in point, we've spotted 2 warning signs for Kulicke and Soffa Industries you should be aware of, and 1 of them makes us a bit uncomfortable.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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.
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