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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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Skandinaviska Enskilda Banken AB (publ.) (STO:SEB A), which has not only revenues, but also profits. 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.
How Fast Is Skandinaviska Enskilda Banken AB (publ.) 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). It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Skandinaviska Enskilda Banken AB (publ.)'s EPS has grown 36% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that Skandinaviska Enskilda Banken AB (publ.)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Skandinaviska Enskilda Banken AB (publ.) maintained stable EBIT margins over the last year, all while growing revenue 2.7% to kr46b. That's progress.
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.
Fortunately, we've got access to analyst forecasts of Skandinaviska Enskilda Banken AB (publ.)'s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Skandinaviska Enskilda Banken AB (publ.) Insiders Aligned With All Shareholders?
Since Skandinaviska Enskilda Banken AB (publ.) has a market capitalization of kr192b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they hold kr131m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.07% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations over kr75b, like Skandinaviska Enskilda Banken AB (publ.), the median CEO pay is around kr20m.
The Skandinaviska Enskilda Banken AB (publ.) CEO received kr16.4m in compensation for the year ending December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is Skandinaviska Enskilda Banken AB (publ.) Worth Keeping An Eye On?
For growth investors like me, Skandinaviska Enskilda Banken AB (publ.)'s raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Each to their own, but I think all this makes Skandinaviska Enskilda Banken AB (publ.) look rather interesting indeed. 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 Skandinaviska Enskilda Banken AB (publ.). You might benefit from giving it a glance today.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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