Profit ratio

Do PSG Konsult (JSE:KST) deserve a spot on your watchlist?

For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it currently lacks a track record of revenue and earnings. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company has not yet proven itself with profits, and eventually the inflow of external capital may dry up.

Contrary to all this, many investors prefer to focus on companies like PSG Konsult (JSE:KST), which not only generates revenue, but also profits. Even if this company is correctly valued by the market, investors agree that the generation of regular profits will continue to give PSG Konsult the means to add long-term value to shareholders.

See our latest analysis for PSG Konsult

How fast is PSG Konsult growing?

Typically, companies experiencing earnings per share (EPS) growth should see similar stock price trends. This makes EPS growth an attractive quality for any business. Over the past three years, PSG Konsult has increased EPS by 16% per year. That’s a good growth rate, if it can be sustained.

One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. Not all income from PSG Konsult this year is income operations, so keep in mind that the revenue and margin figures used in this article may not be the best representation of the underlying business. PSG Konsult’s EBIT margins have remained virtually unchanged over the past year, but the company should be pleased to report revenue growth for the period of 15% to R6.0b. This is a real plus point.

You can check the company’s revenue and profit growth trend in the table below. To see the actual numbers, click on the chart.

JSE: KST Earnings and Revenue History July 2, 2022

While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back strong. So check the strength of PSG Konsult’s balance sheet, before you get too excited.

Are PSG Konsult insiders aligned with all shareholders?

This should give investors a sense of security in owning stock in a company if insiders also own stock, creating a close alignment of their interests. Shareholders will be delighted with the fact that insiders hold PSG Konsult shares for a considerable sum. Since insiders own a large share of shares, currently valued at R890 million, they are highly motivated to push the company to success. This would indicate that the objectives of shareholders and management are identical.

Does PSG Konsult deserve a spot on your watchlist?

A positive point for the PSG Konsult is that it makes the EPS grow. It’s nice to see. If that’s not enough on its own, there are also the fairly notable levels of insider ownership. The combination definitely favored by investors, so consider keeping the company on a watch list. Of course, just because PSG Konsult are growing doesn’t mean they’re undervalued. If you’re wondering about valuation, check out this gauge of its price-to-earnings ratio, relative to its industry.

Although PSG Konsult certainly looks good, it could attract more investors if insiders buy shares. If you like seeing insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.