Yahoo Finance Does Keywords Studios (LON:KWS) Deserve A Spot On Your Watchlist?
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.
In contrast to all that, many investors prefer to focus on companies like Keywords Studios (LON:KWS), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Keywords Studios with the means to add long-term value to shareholders.
View our latest analysis for Keywords Studios
How Quickly Is Keywords Studios Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Keywords Studios' EPS has grown 24% each year, compound, over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.
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. While we note Keywords Studios achieved similar EBIT margins to last year, revenue grew by a solid 37% to €512m. 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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Keywords Studios' future EPS 100% free.
Are Keywords Studios Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
In the last twelve months Keywords Studios insiders spent €35k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.
On top of the insider buying, it's good to see that Keywords Studios insiders have a valuable investment in the business. As a matter of fact, their holding is valued at €14m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Bertrand J. F. Bodson is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between €1.0b and €3.2b, like Keywords Studios, the median CEO pay is around €2.2m.
The Keywords Studios CEO received total compensation of just €735k in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is Keywords Studios Worth Keeping An Eye On?
For growth investors, Keywords Studios' raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Keywords Studios. You might benefit from giving it a glance today.
Keen growth investors love to see insider buying. Thankfully, Keywords Studios isn't the only one. You can see a a free list of them here.
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.
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