Does AS LHV Group (TAL:LHV1T) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like AS LHV Group (TAL:LHV1T). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for AS LHV Group

AS LHV Group's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, AS LHV Group has grown EPS by 28% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of AS LHV Group'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. While we note AS LHV Group achieved similar EBIT margins to last year, revenue grew by a solid 26% to €148m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 AS LHV Group's balance sheet strength, before getting too excited.

Are AS LHV Group Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. AS LHV Group followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Notably, they have an enviable stake in the company, worth €266m. That equates to 24% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like AS LHV Group with market caps between €387m and €1.5b is about €977k.

The AS LHV Group CEO received total compensation of just €444k in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is AS LHV Group Worth Keeping An Eye On?

You can't deny that AS LHV Group has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes AS LHV Group look rather interesting indeed. We don't want to rain on the parade too much, but we did also find 1 warning sign for AS LHV Group that you need to be mindful of.

Although AS LHV Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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. 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.