Here's Why We Think NTG Nordic Transport Group (CPH:NTG) Is Well Worth Watching

By
Simply Wall St
Published
April 12, 2022
CPSE:NTG
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like NTG Nordic Transport Group (CPH:NTG). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

View our latest analysis for NTG Nordic Transport Group

How Fast Is NTG Nordic Transport Group Growing Its Earnings Per Share?

Over the last three years, NTG Nordic Transport Group has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, NTG Nordic Transport Group's EPS shot from kr.5.61 to kr.15.77, over the last year. You don't see 181% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that NTG Nordic Transport Group is growing revenues, and EBIT margins improved by 2.3 percentage points to 7.2%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
CPSE:NTG Earnings and Revenue History April 12th 2022

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check NTG Nordic Transport Group's balance sheet strength, before getting too excited.

Are NTG Nordic Transport Group Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that NTG Nordic Transport Group insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth kr.2.2b. Coming in at 28% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Should You Add NTG Nordic Transport Group To Your Watchlist?

NTG Nordic Transport Group's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering NTG Nordic Transport Group for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for NTG Nordic Transport Group that you need to take into consideration.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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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