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I Ran A Stock Scan For Earnings Growth And Korn Ferry (NYSE:KFY) Passed With Ease

Simply Wall St

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Korn Ferry (NYSE:KFY). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. 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 Korn Ferry

How Fast Is Korn Ferry Growing Its Earnings Per Share?

In the last three years Korn Ferry's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Korn Ferry's EPS shot from US$1.17 to US$3.31, over the last year. You don't see 182% year-on-year growth like that, very often.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Korn Ferry's EBIT margins were flat over the last year, revenue grew by a solid 6.2% to US$1.9b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

NYSE:KFY Income Statement, October 8th 2019
NYSE:KFY Income Statement, October 8th 2019

Fortunately, we've got access to analyst forecasts of Korn Ferry's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Korn Ferry Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Korn Ferry insiders have a significant amount of capital invested in the stock. Indeed, they hold US$25m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 1.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Korn Ferry Deserve A Spot On Your Watchlist?

Korn Ferry's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Korn Ferry is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Korn Ferry is trading on a high P/E or a low P/E, relative to its industry.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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

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.

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. Thank you for reading.