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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kraken Robotics (CVE:PNG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kraken Robotics with the means to add long-term value to shareholders.
View our latest analysis for Kraken Robotics
Kraken Robotics' Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Kraken Robotics to have grown EPS from CA$0.0083 to CA$0.034 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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. The good news is that Kraken Robotics is growing revenues, and EBIT margins improved by 6.8 percentage points to 15%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Kraken Robotics' forecast profits?
Are Kraken Robotics Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Kraken Robotics insiders have a significant amount of capital invested in the stock. Indeed, they hold CA$26m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 4.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.