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 completely lacks a track record of revenue and profit. 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.
So if you're like me, you might be more interested in profitable, growing companies, like Bredband2 i Skandinavien (STO:BRE2). 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.
Bredband2 i Skandinavien's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Bredband2 i Skandinavien grew its EPS by 15% per year. That's a pretty good rate, if the company can sustain it.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Bredband2 i Skandinavien maintained stable EBIT margins over the last year, all while growing revenue 12% to kr653m. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Bredband2 i Skandinavien.
Are Bredband2 i Skandinavien Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.
Like a sturdy phalanx Bredband2 i Skandinavien insiders have stood united by refusing to sell shares over the last year. But my excitement comes from the kr1.3m that Chief Financial Officer Claes Fägersten spent buying shares (at an average price of about kr1.00).
The good news, alongside the insider buying, for Bredband2 i Skandinavien bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have kr307m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 35% of the company, demonstrating a degree of high-level alignment with shareholders.
Is Bredband2 i Skandinavien Worth Keeping An Eye On?
One positive for Bredband2 i Skandinavien is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Bredband2 i Skandinavien is trading on a high P/E or a low P/E, relative to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bredband2 i Skandinavien, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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