Here's Why Tulikivi (HEL:TULAV) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Tulikivi (HEL:TULAV). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Tulikivi

Tulikivi's Improving Profits

In the last three years Tulikivi's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Tulikivi's EPS shot from €0.049 to €0.096, over the last year. Year on year growth of 94% is certainly a sight to behold.

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. The good news is that Tulikivi is growing revenues, and EBIT margins improved by 3.3 percentage points to 13%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since Tulikivi is no giant, with a market capitalisation of €27m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Tulikivi Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Tulikivi shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Director of Finance & Administration Jouko Toivanen bought €16k worth of shares at an average price of around €0.49. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Tulikivi.

It's commendable to see that insiders have been buying shares in Tulikivi, but there is more evidence of shareholder friendly management. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Tulikivi with market caps under €182m is about €340k.

Tulikivi's CEO took home a total compensation package worth €262k in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Tulikivi Deserve A Spot On Your Watchlist?

Tulikivi's earnings per share have been soaring, with growth rates sky high. Not to mention the company's insiders have been adding to their portfolios and the CEO's remuneration policy looks to have had shareholders in mind seeing as it's quite modest for the company size. It could be that Tulikivi is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Tulikivi (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Tulikivi isn't the only one. You can see a a curated list of Finnish companies which have exhibited consistent growth accompanied by recent insider buying.

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.