Does OKEA (OB:OKEA) Deserve A Spot On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 OKEA (OB:OKEA). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for OKEA

How Fast Is OKEA Growing Its Earnings Per Share?

In the last three years OKEA's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. OKEA boosted its trailing twelve month EPS from kr6.00 to kr6.96, in the last year. There's little doubt shareholders would be happy with that 16% gain.

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 OKEA did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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.

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

Are OKEA 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did OKEA insiders refrain from selling stock during the year, but they also spent kr1.1m buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was Chief Executive Officer Svein Liknes who made the biggest single purchase, worth kr780k, paying kr31.21 per share.

The good news, alongside the insider buying, for OKEA bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold kr172m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 4.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does OKEA Deserve A Spot On Your Watchlist?

One positive for OKEA is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. You still need to take note of risks, for example - OKEA has 1 warning sign we think you should be aware of.

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