Does Spar Nord Bank (CPH:SPNO) Deserve A Spot On Your Watchlist?

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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Spar Nord Bank (CPH:SPNO). 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 Spar Nord Bank

How Fast Is Spar Nord Bank Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Spar Nord Bank's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 40%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. Not all of Spar Nord Bank'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 Spar Nord Bank achieved similar EBIT margins to last year, revenue grew by a solid 31% to kr.5.9b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Spar Nord Bank Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Even though some insiders sold down their holdings, their actions speak louder than words with kr.1.7m more invested than sold by people who know they company best. This overall confidence in the company at current the valuation signals their optimism. Zooming in, we can see that the biggest insider purchase was by Independent Director Henrik Sjogreen for kr.1.8m worth of shares, at about kr.118 per share.

It's commendable to see that insiders have been buying shares in Spar Nord Bank, but there is more evidence of shareholder friendly management. Namely, Spar Nord Bank has a very reasonable level of CEO pay. For companies with market capitalisations between kr.6.7b and kr.21b, like Spar Nord Bank, the median CEO pay is around kr.14m.

Spar Nord Bank's CEO took home a total compensation package of kr.6.9m in the year prior to December 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Spar Nord Bank Deserve A Spot On Your Watchlist?

Spar Nord Bank's earnings have taken off in quite an impressive fashion. Not to mention the company's insiders have been adding to their portfolios and the CEO's remuneration policy looks to have had shareholders in mind seeing as it's quite modest for the company size. It could be that Spar Nord Bank is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. However, before you get too excited we've discovered 2 warning signs for Spar Nord Bank (1 doesn't sit too well with us!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Spar Nord Bank, you'll probably love this curated collection of companies in DK that have an attractive valuation 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.