Here's Why We Think Byggma (OB:BMA) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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 Byggma (OB:BMA). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for Byggma

How Fast Is Byggma 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. We can see that in the last three years Byggma grew its EPS by 10% per year. That's a good rate of growth, if it can be sustained.

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. The good news is that Byggma is growing revenues, and EBIT margins improved by 2.6 percentage points to 7.5%, over the last year. That's great to see, on both counts.

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.

Byggma isn't a huge company, given its market capitalization of kr1.1b. That makes it extra important to check on its balance sheet strength.

Are Byggma Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Byggma insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 68%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have kr759m invested in the business, using the current share price. That's nothing to sneeze at!

Does Byggma Deserve A Spot On Your Watchlist?

One important encouraging feature of Byggma is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Before you take the next step you should know about the 2 warning signs for Byggma that we have uncovered.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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. 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.
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