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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Kina Securities (ASX:KSL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Kina Securities

How Fast Is Kina Securities Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Kina Securities grew its EPS by 13% per year. That's a pretty good rate, if the company can sustain it.

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. Not all of Kina Securities's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Kina Securities's EBIT margins were flat over the last year, revenue grew by a solid 28% to K200m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

 earnings-and-revenue-history

Kina Securities isn't a huge company, given its market capitalization of AU$179m. That makes it extra important to check on its balance sheet strength.

Are Kina Securities Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Kina Securities insiders refrain from selling stock during the year, but they also spent K131k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was Independent Non-Executive Director Paul Hutchinson who made the biggest single purchase, worth AU$32k, paying AU$1.27 per share.

Does Kina Securities Deserve A Spot On Your Watchlist?

One positive for Kina Securities is that it is growing EPS. That's nice to see. Not every business can grow its EPS, but Kina Securities certainly can. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. We should say that we've discovered 3 warning signs for Kina Securities (1 shouldn't be ignored!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Kina Securities, you'll probably love this freelist of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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. 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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