Does DNB Bank (OB:DNB) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

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 DNB Bank (OB:DNB). 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.

Check out our latest analysis for DNB Bank

DNB Bank's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, DNB Bank has grown EPS by 19% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Not all of DNB Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note DNB Bank achieved similar EBIT margins to last year, revenue grew by a solid 21% to kr71b. That's a real positive.

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.

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 DNB Bank's future profits.

Are DNB Bank Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the kr1.1m that Independent Vice Chair of the Board Jens Olsen spent buying shares (at an average price of about kr181). Purchases like this clue us in to the to the faith management has in the business' future.

Does DNB Bank Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into DNB Bank's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out DNB Bank in more detail. Before you take the next step you should know about the 2 warning signs for DNB Bank (1 is a bit unpleasant!) that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, DNB Bank isn't the only one. You can see a a free list of them here.

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.