Should You Be Adding Sydbank (CPH:SYDB) To Your Watchlist Today?

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.' 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 Sydbank (CPH:SYDB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sydbank with the means to add long-term value to shareholders.

View our latest analysis for Sydbank

How Quickly Is Sydbank 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. Recognition must be given to the that Sydbank has grown EPS by 53% per year, over the last three years. 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 Sydbank'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 Sydbank achieved similar EBIT margins to last year, revenue grew by a solid 23% to kr.6.7b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Sydbank's forecast profits?

Are Sydbank 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. 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.

Insiders in Sydbank both added to and reduced their holdings over the preceding 12 months. All in all though, their acquisitions outweighed the amount of shares they sold off. At face value we can consider this a fairly encouraging sign for the company.

Recent insider purchases of Sydbank stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, Sydbank has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Sydbank with market caps between kr.14b and kr.45b is about kr.14m.

Sydbank's CEO took home a total compensation package worth kr.8.3m in the year leading up to December 2022. 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.

Is Sydbank Worth Keeping An Eye On?

Sydbank's earnings have taken off in quite an impressive fashion. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that Sydbank is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. We don't want to rain on the parade too much, but we did also find 2 warning signs for Sydbank (1 shouldn't be ignored!) that you need to be mindful of.

The good news is that Sydbank is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.