Here's Why I Think Kingspan Group (ISE:KRX) Is An Interesting Stock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kingspan Group (ISE:KRX). 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.

Check out our latest analysis for Kingspan Group

How Fast Is Kingspan Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Kingspan Group has grown EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Kingspan Group maintained stable EBIT margins over the last year, all while growing revenue 6.6% to €4.7b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are Kingspan Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a €8.3b company like Kingspan Group. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at €1.3b. That equates to 16% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Kingspan Group with market caps between €3.6b and €11b is about €2.4m.

Kingspan Group offered total compensation worth €2.0m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Kingspan Group To Your Watchlist?

One important encouraging feature of Kingspan Group is that it is growing profits. Earnings growth might be the main game for Kingspan Group, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. It is worth noting though that we have found 2 warning signs for Kingspan Group that you need to take into consideration.

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.

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.

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