Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
So if you’re like me, you might be more interested in profitable, growing companies, like SpareBank 1 SR-Bank (OB:SRBANK). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. 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.
How Fast Is SpareBank 1 SR-Bank Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that SpareBank 1 SR-Bank has managed to grow EPS by 26% per year 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.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of SpareBank 1 SR-Bank’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 SR-Bank’s EBIT margins were flat over the last year, revenue grew by a solid 22% to kr6.2b. That’s a real positive.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of SpareBank 1 SR-Bank’s forecast profits?
Are SpareBank 1 SR-Bank Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
We note that SpareBank 1 SR-Bank insiders spent kr663k on stock, over the last year; in contrast, we didn’t see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident.
Is SpareBank 1 SR-Bank Worth Keeping An Eye On?
Given my belief that share price follows earnings per share you can easily imagine how I feel about SpareBank 1 SR-Bank’s strong EPS growth. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. To put it succinctly; SpareBank 1 SR-Bank is a strong candidate for your watchlist. Of course, just because SpareBank 1 SR-Bank 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.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of SpareBank 1 SR-Bank, 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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