Is Now The Time To Put Pandora (CPH:PNDORA) On Your Watchlist?

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. 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 Pandora (CPH:PNDORA). 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 Pandora

How Quickly Is Pandora 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. Pandora's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 56%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Pandora maintained stable EBIT margins over the last year, all while growing revenue 7.1% to kr.27b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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 Pandora's future profits.

Are Pandora 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's nice to see that there have been no reports of any insiders selling shares in Pandora in the previous 12 months. With that in mind, it's heartening that Lilian Biner, the Independent Director of the company, paid kr.247k for shares at around kr.677 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Does Pandora Deserve A Spot On Your Watchlist?

Pandora's earnings have taken off in quite an impressive fashion. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. If this is the case, then keeping a watch over Pandora could be in your best interest. Before you take the next step you should know about the 2 warning signs for Pandora that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, Pandora isn't the only one. You can see a a free list of them here.

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.