Stock Analysis

If EPS Growth Is Important To You, Outokumpu Oyj (HEL:OUT1V) Presents An Opportunity

Published
HLSE:OUT1V
Source: Shutterstock

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Outokumpu Oyj (HEL:OUT1V), which has not only revenues, but also profits. 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.

Our analysis indicates that OUT1V is potentially undervalued!

Outokumpu Oyj's Improving Profits

In the last three years Outokumpu Oyj'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. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Outokumpu Oyj's EPS catapulted from €0.79 to €2.12, over the last year. It's not often a company can achieve year-on-year growth of 170%. That could be a sign that the business has reached a true inflection point.

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. Outokumpu Oyj shareholders can take confidence from the fact that EBIT margins are up from 7.1% to 11%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
HLSE:OUT1V Earnings and Revenue History December 2nd 2022

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Outokumpu Oyj's future profits.

Are Outokumpu Oyj Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Outokumpu Oyj followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold €20m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Outokumpu Oyj with market caps between €953m and €3.0b is about €1.3m.

The Outokumpu Oyj CEO received €796k in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Outokumpu Oyj Worth Keeping An Eye On?

Outokumpu Oyj's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Outokumpu Oyj certainly ticks a few boxes, so we think it's probably well worth further consideration. Still, you should learn about the 2 warning signs we've spotted with Outokumpu Oyj (including 1 which can't be ignored).

Although Outokumpu Oyj 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.

Valuation is complex, but we're helping make it simple.

Find out whether Outokumpu Oyj is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis