Does Sandnes Sparebank (OB:SADG) 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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Sandnes Sparebank (OB:SADG), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Sandnes Sparebank

How Fast Is Sandnes Sparebank 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Sandnes Sparebank grew its EPS by 8.0% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. Our analysis has highlighted that Sandnes Sparebank'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. EBIT margins for Sandnes Sparebank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to kr764m. 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. To see the actual numbers, click on the chart.

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 Sandnes Sparebank's future EPS 100% free.

Are Sandnes Sparebank Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Sandnes Sparebank 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 kr394m worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 20% of the company; visible skin in the game.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Sandnes Sparebank with market caps between kr1.1b and kr4.4b is about kr5.1m.

The Sandnes Sparebank CEO received kr3.5m in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Sandnes Sparebank Deserve A Spot On Your Watchlist?

One important encouraging feature of Sandnes Sparebank is that it is growing profits. The growth of EPS may be the eye-catching headline for Sandnes Sparebank, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Still, you should learn about the 1 warning sign we've spotted with Sandnes Sparebank.

Although Sandnes Sparebank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Norwegian companies that not only boast of strong growth but have also seen recent insider buying..

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.