Here's Why We Think Alm. Brand (CPH:ALMB) Is Well Worth Watching

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Alm. Brand (CPH:ALMB), 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.

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How Fast Is Alm. Brand Growing Its Earnings Per Share?

Alm. Brand has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Alm. Brand's EPS catapulted from kr.0.34 to kr.0.67, over the last year. Year on year growth of 98% is certainly a sight to behold.

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. It's noted that Alm. Brand's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Unfortunately, Alm. Brand's revenue dropped 3.2% last year, but the silver lining is that EBIT margins improved from 12% to 15%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

See our latest analysis for Alm. Brand

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Alm. Brand.

Are Alm. Brand 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Alm. Brand top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Group CEO, Rasmus Nielsen, paid kr.1.3m to buy shares at an average price of kr.15.29. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Is Alm. Brand Worth Keeping An Eye On?

Alm. Brand's earnings per share growth have been climbing higher at an appreciable rate. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over Alm. Brand could be in your best interest. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Alm. Brand (1 is significant) you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Alm. Brand isn't the only one. You can see a a curated list of Danish companies which have exhibited consistent growth accompanied by high insider ownership.

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.