With EPS Growth And More, Eastman Kodak (NYSE:KODK) Makes An Interesting Case
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.' 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 Eastman Kodak (NYSE:KODK). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Eastman Kodak
Eastman Kodak's Improving Profits
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Eastman Kodak to have grown EPS from US$0.16 to US$0.70 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. We note that while EBIT margins have improved from 6.0% to 15%, the company has actually reported a fall in revenue by 7.3%. That's not a good look.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
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 Eastman Kodak's balance sheet strength, before getting too excited.
Are Eastman Kodak Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Eastman Kodak insiders spent US$140k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Director, Michael Sileck, who made the biggest single acquisition, paying US$66k for shares at about US$4.39 each.
Along with the insider buying, another encouraging sign for Eastman Kodak is that insiders, as a group, have a considerable shareholding. To be specific, they have US$33m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.2% of the company; visible skin in the game.
Is Eastman Kodak Worth Keeping An Eye On?
Eastman Kodak's earnings have taken off in quite an impressive fashion. 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 Eastman Kodak belongs near the top of your watchlist. Still, you should learn about the 2 warning signs we've spotted with Eastman Kodak (including 1 which is a bit concerning).
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Eastman Kodak, 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.
