Here's Why I Think AF Gruppen (OB:AFG) Might Deserve Your Attention Today

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like AF Gruppen (OB:AFG). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for AF Gruppen

How Quickly Is AF Gruppen Increasing Earnings Per Share?

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years AF Gruppen grew its EPS by 9.3% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note AF Gruppen's EBIT margins were flat over the last year, revenue grew by a solid 4.8% to kr27b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for AF Gruppen?

Are AF Gruppen Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Any way you look at it AF Gruppen shareholders can gain quiet confidence from the fact that insiders shelled out kr5.7m to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. We also note that it was the Chief Executive Officer, Amund Tøftum, who made the biggest single acquisition, paying kr1.6m for shares at about kr177 each.

Along with the insider buying, another encouraging sign for AF Gruppen is that insiders, as a group, have a considerable shareholding. Given insiders own a small fortune of shares, currently valued at kr895m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Does AF Gruppen Deserve A Spot On Your Watchlist?

One important encouraging feature of AF Gruppen is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. What about risks? Every company has them, and we've spotted 1 warning sign for AF Gruppen you should know about.

The good news is that AF Gruppen is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.