We Ran A Stock Scan For Earnings Growth And DAEYANG ELECTRIC.Co.Ltd (KOSDAQ:108380) Passed With Ease

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.’ A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like DAEYANG ELECTRIC.Co.Ltd (KOSDAQ:108380). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.

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DAEYANG ELECTRIC.Co.Ltd’s Improving Profits

DAEYANG ELECTRIC.Co.Ltd 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. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, DAEYANG ELECTRIC.Co.Ltd’s EPS catapulted from ₩1,421 to ₩2,966, over the last year. It’s not often a company can achieve year-on-year growth of 109%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. DAEYANG ELECTRIC.Co.Ltd shareholders can take confidence from the fact that EBIT margins are up from 5.7% to 12%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

See our latest analysis for DAEYANG ELECTRIC.Co.Ltd

Since DAEYANG ELECTRIC.Co.Ltd is no giant, with a market capitalisation of ₩280b, you should definitely check its cash and debt before getting too excited about its prospects.

Are DAEYANG ELECTRIC.Co.Ltd Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we’re pleased to report that DAEYANG ELECTRIC.Co.Ltd insiders own a meaningful share of the business. To be exact, company insiders hold 62% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₩172b riding on the stock, at current prices. So there’s plenty there to keep them focused!

Should You Add DAEYANG ELECTRIC.Co.Ltd To Your Watchlist?

DAEYANG ELECTRIC.Co.Ltd’s earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, DAEYANG ELECTRIC.Co.Ltd is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Before you take the next step you should know about the 1 warning sign for DAEYANG ELECTRIC.Co.Ltd that we have uncovered.

Although DAEYANG ELECTRIC.Co.Ltd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of South Korean companies that not only boast of strong growth but have strong insider backing.

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.