Should You Be Adding Spar Nord Bank (CPH:SPNO) To Your Watchlist Today?

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.

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). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Spar Nord Bank

How Quickly Is Spar Nord Bank Increasing Earnings Per Share?

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Spar Nord Bank has managed to grow EPS by 30% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Spar Nord Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Spar Nord Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to kr.4.5b. 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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Spar Nord Bank's balance sheet strength, before getting too excited.

Are Spar Nord Bank 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Despite some Spar Nord Bank insiders disposing of some shares, we note that there was kr.409k more in buying interest among those who know the company best On balance, that's a good sign. It is also worth noting that it was MD & Member of Executive Board John Lundsgaard who made the biggest single purchase, worth kr.196k, paying kr.99.53 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. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations between kr.6.7b and kr.22b, like Spar Nord Bank, the median CEO pay is around kr.16m.

The CEO of Spar Nord Bank only received kr.6.2m in total compensation for the year ending December 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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. It can also be a sign of good governance, more generally.

Should You Add Spar Nord Bank To Your Watchlist?

For growth investors, Spar Nord Bank's raw rate of earnings growth is a beacon in the night. To add to the positives, Spar Nord Bank has recorded instances of insider buying and a modest executive pay to boot. The overriding message from this quick rundown is yes, this stock is worth investigating further. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Spar Nord Bank (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process.

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 free list of growing companies that insiders are buying.

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.