With EPS Growth And More, ABG Sundal Collier Holding (OB:ABG) Is Interesting

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like ABG Sundal Collier Holding (OB:ABG). 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.

See our latest analysis for ABG Sundal Collier Holding

ABG Sundal Collier Holding's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. ABG Sundal Collier Holding managed to grow EPS by 4.7% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. While we note ABG Sundal Collier Holding's EBIT margins were flat over the last year, revenue grew by a solid 36% to kr1.5b. That's a real positive.

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 ABG Sundal Collier Holding's balance sheet strength, before getting too excited.

Are ABG Sundal Collier Holding 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. 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.

While ABG Sundal Collier Holding insiders did net -kr2.2m selling stock over the last year, they invested kr7.9m, a much higher figure. On balance, to me, this signals their optimism. Zooming in, we can see that the biggest insider purchase was by Co-Head of Global Research John A. Olaisen for kr3.1m worth of shares, at about kr3.08 per share.

On top of the insider buying, it's good to see that ABG Sundal Collier Holding insiders have a valuable investment in the business. With a whopping kr474m worth of shares as a group, insiders have plenty riding on the company's success. At 16% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Does ABG Sundal Collier Holding Deserve A Spot On Your Watchlist?

One positive for ABG Sundal Collier Holding is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. However, before you get too excited we've discovered 2 warning signs for ABG Sundal Collier Holding (1 is a bit concerning!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of ABG Sundal Collier Holding, 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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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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