Is Now The Time To Put Consti Oyj (HEL:CONSTI) On Your Watchlist?

By
Simply Wall St
Published
May 20, 2021
HLSE:CONSTI
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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Consti Oyj (HEL:CONSTI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Consti Oyj

Consti Oyj's Improving Profits

Over the last three years, Consti Oyj 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. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Consti Oyj's EPS shot from €0.38 to €0.67, over the last year. You don't see 75% year-on-year growth like that, very often.

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. Consti Oyj's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

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
HLSE:CONSTI Earnings and Revenue History May 21st 2021

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

Are Consti Oyj 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. As a result, I'm encouraged by the fact that insiders own Consti Oyj shares worth a considerable sum. To be specific, they have €22m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 24% of the company; visible skin in the game.

Should You Add Consti Oyj To Your Watchlist?

Consti Oyj's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. 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 Consti Oyj for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Consti Oyj , and understanding these should be part of your investment process.

You can invest in 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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