It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like SpareBank 1 Østfold Akershus (OB:SOAG), which has not only revenues, but also profits. Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
SpareBank 1 Østfold Akershus’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 share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, SpareBank 1 Østfold Akershus’s EPS has grown 19% each year, compound, over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
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 SpareBank 1 Østfold Akershus’s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I’ve used might not be the best representation of the underlying business. While we note SpareBank 1 Østfold Akershus’s EBIT margins were flat over the last year, revenue grew by a solid 8.1% to kr811m. That’s progress.
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 SpareBank 1 Østfold Akershus’s future profits.
Are SpareBank 1 Østfold Akershus Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
One positive for SpareBank 1 Østfold Akershus, is that company insiders paid kr119k for shares in the last year. This might not be a huge sum, but it’s well worth noting anyway, given the complete lack of selling.
It’s me that SpareBank 1 Østfold Akershus insiders are buying the stock, but that’s not the only reason to think leader are fair to shareholders. I refer to the very reasonable level of CEO pay. I discovered that the median total compensation for the CEOs of companies like SpareBank 1 Østfold Akershus with market caps between kr1.8b and kr7.2b is about kr4.1m.
The SpareBank 1 Østfold Akershus CEO received kr3.5m in compensation for the year ending December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I’d also argue reasonable pay levels attest to good decision making more generally.
Does SpareBank 1 Østfold Akershus Deserve A Spot On Your Watchlist?
You can’t deny that SpareBank 1 Østfold Akershus has grown its earnings per share at a very impressive rate. That’s attractive. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The message I’d take from this quick rundown is that, yes, this stock is worth investigating further. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if SpareBank 1 Østfold Akershus is trading on a high P/E or a low P/E, relative to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of SpareBank 1 Østfold Akershus, you’ll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.