I Ran A Stock Scan For Earnings Growth And Tryg (CPH:TRYG) Passed With Ease

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Tryg (CPH:TRYG). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Tryg

Tryg's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Tryg grew its EPS by 17% per year. That's a good rate of growth, if it can be sustained.

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 Tryg's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Tryg shareholders can take confidence from the fact that EBIT margins are up from 12% to 21%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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

Fortunately, we've got access to analyst forecasts of Tryg's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Tryg Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like Tryg, with market caps over kr.50b, is about kr.24m.

The Tryg CEO received kr.21m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Tryg Deserve A Spot On Your Watchlist?

One positive for Tryg is that it is growing EPS. That's nice to see. Not only that, but the CEO is paid quite reasonably, which makes me feel more trusting of the board of directors. So I do think the stock deserves further research, if not instant addition to your watchlist. Even so, be aware that Tryg is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

Although Tryg certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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. 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.
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