Is Now The Time To Put Veidekke (OB:VEI) On Your Watchlist?

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 currently lacks a track record of revenue and profit. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Veidekke (OB:VEI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Veidekke with the means to add long-term value to shareholders.

View our latest analysis for Veidekke

How Fast Is Veidekke Growing?

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. Veidekke managed to grow EPS by 8.8% per year, over three years. That's a good rate of growth, if it can be sustained.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Veidekke achieved similar EBIT margins to last year, revenue grew by a solid 8.6% to kr43b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Veidekke's balance sheet strength, before getting too excited.

Are Veidekke Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

It's nice to see that there have been no reports of any insiders selling shares in Veidekke in the previous 12 months. With that in mind, it's heartening that Hanne Rønneberg, the Independent Director of the company, paid kr104k for shares at around kr104 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

It's commendable to see that insiders have been buying shares in Veidekke, but there is more evidence of shareholder friendly management. Namely, Veidekke has a very reasonable level of CEO pay. For companies with market capitalisations between kr11b and kr35b, like Veidekke, the median CEO pay is around kr9.3m.

Veidekke's CEO took home a total compensation package worth kr6.6m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Veidekke To Your Watchlist?

One positive for Veidekke is that it is growing EPS. That's nice to see. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. The sum of all that, points to a quality business, and a genuine prospect for further research. Still, you should learn about the 1 warning sign we've spotted with Veidekke.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Veidekke, you'll probably love this curated collection of companies in NO that have an attractive valuation alongside 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com