We Ran A Stock Scan For Earnings Growth And Smurfit Kappa Group (ISE:SK3) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Smurfit Kappa Group (ISE:SK3). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Smurfit Kappa Group

How Fast Is Smurfit Kappa Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Smurfit Kappa Group's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 59%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. While we note Smurfit Kappa Group achieved similar EBIT margins to last year, revenue grew by a solid 31% to €12b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Smurfit Kappa Group's future EPS 100% free.

Are Smurfit Kappa Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's good to see Smurfit Kappa Group insiders walking the walk, by spending €300k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was Independent Non-Executive Chairman Irial Finan who made the biggest single purchase, worth €180k, paying €35.90 per share.

Along with the insider buying, another encouraging sign for Smurfit Kappa Group is that insiders, as a group, have a considerable shareholding. With a whopping €65m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Does Smurfit Kappa Group Deserve A Spot On Your Watchlist?

Smurfit Kappa Group's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Smurfit Kappa Group belongs near the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Smurfit Kappa Group (1 is a bit unpleasant) you should be aware of.

The good news is that Smurfit Kappa Group is not the only growth stock with insider buying. Here's a list of them... 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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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.