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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Rejlers (STO:REJL B), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. 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.
How Fast Is Rejlers Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Rejlers has grown EPS by 41% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
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. The good news is that Rejlers is growing revenues, and EBIT margins improved by 4.5 percentage points to 5.4%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
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.
Since Rejlers is no giant, with a market capitalization of kr2.1b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Rejlers Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Not only did Rejlers insiders refrain from selling stock during the year, but they also spent kr618k buying it. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was President & CEO Viktor Svensson who made the biggest single purchase, worth kr257k, paying kr80.00 per share.
The good news, alongside the insider buying, for Rejlers bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping kr497m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 23% of the stock on issue, thus making insiders influential, and aligned, owners of the business.
Should You Add Rejlers To Your Watchlist?
Rejlers's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Rejlers deserves timely attention. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Rejlers.
As a growth investor I do like to see insider buying. But Rejlers 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
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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