Here's Why We Think Wirtek (CPH:WIRTEK) Might Deserve Your Attention Today

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. 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.

In contrast to all that, many investors prefer to focus on companies like Wirtek (CPH:WIRTEK), 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 Wirtek

Wirtek's Improving Profits

Over the last three years, Wirtek has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Over the last year, Wirtek increased its EPS from kr.0.74 to kr.0.81. That amounts to a small improvement of 9.7%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Wirtek achieved similar EBIT margins to last year, revenue grew by a solid 90% to kr.60m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Wirtek is no giant, with a market capitalisation of kr.137m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Wirtek Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Wirtek will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Owning 50% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Of course, Wirtek is a very small company, with a market cap of only kr.137m. So despite a large proportional holding, insiders only have kr.68m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Wirtek Deserve A Spot On Your Watchlist?

One positive for Wirtek is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Wirtek (at least 1 which is concerning) , and understanding them should be part of your investment process.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.