Here's Why We Think Tryg (CPH:TRYG) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

In contrast to all that, many investors prefer to focus on companies like Tryg (CPH:TRYG), 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.

See our latest analysis for Tryg

How Fast Is Tryg Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Tryg's EPS shot up from kr.5.51 to kr.7.13; a result that's bound to keep shareholders happy. That's a impressive gain of 29%.

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. Not all of Tryg'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. It was a year of stability for Tryg as both revenue and EBIT margins remained have been flat over the past year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Tryg's future EPS 100% free.

Are Tryg 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Tryg shares, in the last year. So it's definitely nice that Independent Supervisory Board Member Mengmeng Du bought kr.139k worth of shares at an average price of around kr.139. It seems that at least one insider is prepared to show the market there is potential within Tryg.

The good news, alongside the insider buying, for Tryg bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have kr.111m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Johan Brammer is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Tryg, with market caps over kr.55b, is around kr.25m.

The Tryg CEO received kr.16m in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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 a culture of integrity, in a broader sense.

Does Tryg Deserve A Spot On Your Watchlist?

You can't deny that Tryg has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. We should say that we've discovered 1 warning sign for Tryg that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Tryg, 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.

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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.

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