If EPS Growth Is Important To You, Sparebanken Vest (OB:SVEG) 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 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.

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 Sparebanken Vest (OB:SVEG). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Sparebanken Vest

How Quickly Is Sparebanken Vest Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Sparebanken Vest has managed to grow EPS by 21% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. It's noted that Sparebanken Vest's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Sparebanken Vest achieved similar EBIT margins to last year, revenue grew by a solid 16% to kr5.7b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Sparebanken Vest's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sparebanken Vest 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Sparebanken Vest shares, in the last year. So it's definitely nice that Independent Deputy Chairman Magne Morken bought kr63k worth of shares at an average price of around kr87.61. It seems that at least one insider is prepared to show the market there is potential within Sparebanken Vest.

The good news, alongside the insider buying, for Sparebanken Vest bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at kr322m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 2.7%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Sparebanken Vest Deserve A Spot On Your Watchlist?

You can't deny that Sparebanken Vest has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Sparebanken Vest you should know about.

Keen growth investors love to see insider buying. Thankfully, Sparebanken Vest 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.