It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
So if you’re like me, you might be more interested in profitable, growing companies, like Alfa Laval (STO:ALFA). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Quickly Is Alfa Laval Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Alfa Laval’s EPS has grown 34% each year, compound, over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
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. Alfa Laval maintained stable EBIT margins over the last year, all while growing revenue 12% to kr47b. That’s a real positive.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. 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 Alfa Laval’s forecast profits?
Are Alfa Laval 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.
First things first; I didn’t see insiders sell Alfa Laval shares in the last year. But the really good news is that President & CEO Tom Erixon spent kr2.3m buying stock stock, at an average price of around kr231. To me that means at least one insider thinks that the company is doing well – and they are backing that view with cash.
Should You Add Alfa Laval To Your Watchlist?
You can’t deny that Alfa Laval has grown its earnings per share at a very impressive rate. That’s attractive. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Alfa Laval is probably worth spending some time on. We should say that we’ve discovered 1 warning sign for Alfa Laval that you should be aware of before investing here.
As a growth investor I do like to see insider buying. But Alfa Laval 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.
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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. Thank you for reading.