Here's Why We Think Ringkjøbing Landbobank (CPH:RILBA) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ringkjøbing Landbobank (CPH:RILBA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ringkjøbing Landbobank with the means to add long-term value to shareholders.

See our latest analysis for Ringkjøbing Landbobank

How Quickly Is Ringkjøbing Landbobank Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Ringkjøbing Landbobank's EPS has grown 35% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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 Ringkjøbing Landbobank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Ringkjøbing Landbobank achieved similar EBIT margins to last year, revenue grew by a solid 37% to kr.4.1b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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 Ringkjøbing Landbobank.

Are Ringkjøbing Landbobank Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Any way you look at it Ringkjøbing Landbobank shareholders can gain quiet confidence from the fact that insiders shelled out kr.2.1m to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. Zooming in, we can see that the biggest insider purchase was by Independent Chairman Martin Pedersen for kr.1.9m worth of shares, at about kr.952 per share.

On top of the insider buying, it's good to see that Ringkjøbing Landbobank insiders have a valuable investment in the business. To be specific, they have kr.152m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, John Fisker, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Ringkjøbing Landbobank with market caps between kr.14b and kr.44b is about kr.18m.

Ringkjøbing Landbobank's CEO took home a total compensation package worth kr.9.4m in the year leading up to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Ringkjøbing Landbobank Deserve A Spot On Your Watchlist?

You can't deny that Ringkjøbing Landbobank has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. Still, you should learn about the 1 warning sign we've spotted with Ringkjøbing Landbobank.

Keen growth investors love to see insider activity. Thankfully, Ringkjøbing Landbobank isn't the only one. You can see a a curated list of Danish companies which have exhibited consistent growth accompanied by high insider ownership.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.