Do DNB Bank's (OB:DNB) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like DNB Bank (OB:DNB), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide DNB Bank with the means to add long-term value to shareholders.

See our latest analysis for DNB Bank

DNB Bank'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 means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that DNB Bank's EPS has grown 24% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that DNB Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note DNB Bank achieved similar EBIT margins to last year, revenue grew by a solid 8.2% to kr80b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. 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 DNB Bank's future EPS 100% free.

Are DNB Bank 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's good to see DNB Bank insiders walking the walk, by spending kr7.2m 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. We also note that it was the Independent Vice Chair of the Board, Jens Olsen, who made the biggest single acquisition, paying kr1.2m for shares at about kr206 each.

Should You Add DNB Bank To Your Watchlist?

You can't deny that DNB Bank has grown its earnings per share at a very impressive rate. That's attractive. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, DNB Bank is probably worth spending some time on. What about risks? Every company has them, and we've spotted 2 warning signs for DNB Bank (of which 1 can't be ignored!) you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of DNB Bank, you'll probably love this curated collection of companies in NO that have an attractive valuation alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.