If EPS Growth Is Important To You, SpareBank 1 SMN (OB:MING) Presents An Opportunity

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in SpareBank 1 SMN (OB:MING). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide SpareBank 1 SMN with the means to add long-term value to shareholders.

Check out our latest analysis for SpareBank 1 SMN

How Fast Is SpareBank 1 SMN Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that SpareBank 1 SMN's EPS has grown 17% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Our analysis has highlighted that SpareBank 1 SMN's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note SpareBank 1 SMN achieved similar EBIT margins to last year, revenue grew by a solid 29% to kr8.4b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for SpareBank 1 SMN?

Are SpareBank 1 SMN 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did SpareBank 1 SMN insiders refrain from selling stock during the year, but they also spent kr1.2m buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was Chief Executive Officer of SpareBank 1 Regnskapshuset SMN Arne Nypan who made the biggest single purchase, worth kr401k, paying kr149 per share.

It's commendable to see that insiders have been buying shares in SpareBank 1 SMN, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like SpareBank 1 SMN with market caps between kr11b and kr35b is about kr9.3m.

SpareBank 1 SMN's CEO took home a total compensation package worth kr6.9m in the year leading up to December 2023. That is actually below the median for CEO's of similarly sized companies. 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. It can also be a sign of good governance, more generally.

Does SpareBank 1 SMN Deserve A Spot On Your Watchlist?

For growth investors, SpareBank 1 SMN's raw rate of earnings growth is a beacon in the night. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. On balance the message seems to be that this stock is worth looking at, at least for a while. Of course, just because SpareBank 1 SMN is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Keen growth investors love to see insider activity. Thankfully, SpareBank 1 SMN isn't the only one. You can see a a curated list of Norwegian companies which have exhibited consistent growth accompanied by high insider ownership.

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.