Stock Analysis

Should You Be Adding Ringkjøbing Landbobank (CPH:RILBA) To Your Watchlist Today?

CPSE:RILBA
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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Ringkjøbing Landbobank (CPH:RILBA), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Ringkjøbing Landbobank

How Fast Is Ringkjøbing Landbobank Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Ringkjøbing Landbobank'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 satisfied.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Ringkjøbing Landbobank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Ringkjøbing Landbobank achieved similar EBIT margins to last year, revenue grew by a solid 35% to kr.3.6b. That's progress.

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.

earnings-and-revenue-history
CPSE:RILBA Earnings and Revenue History December 30th 2023

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Ringkjøbing Landbobank's future profits.

Are Ringkjøbing Landbobank Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Shareholders in Ringkjøbing Landbobank will be more than happy to see insiders committing themselves to the company, spending kr.3.9m on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. We also note that it was the Independent Chairman, Martin Pedersen, who made the biggest single acquisition, paying kr.1.9m for shares at about kr.962 each.

Along with the insider buying, another encouraging sign for Ringkjøbing Landbobank is that insiders, as a group, have a considerable shareholding. Indeed, they hold kr.136m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. 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 Ringkjøbing Landbobank's CEO, John Fisker, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Ringkjøbing Landbobank with market caps between kr.13b and kr.43b is about kr.15m.

Ringkjøbing Landbobank's CEO took home a total compensation package worth kr.7.8m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Ringkjøbing Landbobank To Your Watchlist?

For growth investors, Ringkjøbing Landbobank's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. 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 Ringkjøbing Landbobank.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Ringkjøbing Landbobank, you'll probably love this curated collection of companies in DK that have witnessed growth alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Ringkjøbing Landbobank is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.