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. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Svenska Cellulosa Aktiebolaget (STO:SCA B). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Svenska Cellulosa Aktiebolaget Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Svenska Cellulosa Aktiebolaget grew its EPS from kr5.21 to kr22.10, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.
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. Not all of Svenska Cellulosa Aktiebolaget’s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I’ve used might not be the best representation of the underlying business. While Svenska Cellulosa Aktiebolaget did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Svenska Cellulosa Aktiebolaget?
Are Svenska Cellulosa Aktiebolaget 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Any way you look at it Svenska Cellulosa Aktiebolaget shareholders can gain quiet confidence from the fact that insiders shelled out kr5.2m to buy stock, over the last year. When you contrast that with the complete lack of sales, it’s easy for shareholders to brim with joyful expectancy. We also note that it was the , Magnus Svensson, who made the biggest single acquisition, paying kr1.7m for shares at about kr84.84 each.
Is Svenska Cellulosa Aktiebolaget Worth Keeping An Eye On?
Svenska Cellulosa Aktiebolaget’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. If you’re like me, you’ll find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that’s the case, you may regret neglecting to put Svenska Cellulosa Aktiebolaget on your watchlist. Of course, profit growth is one thing but it’s even better if Svenska Cellulosa Aktiebolaget is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.
As a growth investor I do like to see insider buying. But Svenska Cellulosa Aktiebolaget 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 email@example.com. 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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