With EPS Growth And More, Selvaag Bolig (OB:SBO) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Selvaag Bolig (OB:SBO), which has not only revenues, but also profits. 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.

View our latest analysis for Selvaag Bolig

How Fast Is Selvaag Bolig 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 makes EPS growth an attractive quality for any company. Who among us would not applaud Selvaag Bolig's stratospheric annual EPS growth of 55%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. Selvaag Bolig's EBIT margins have actually improved by 32.0 percentage points in the last year, to reach 56%, but, on the flip side, revenue was down 19%. That's not ideal.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Selvaag Bolig's future profits.

Are Selvaag Bolig Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Selvaag Bolig insiders have a significant amount of capital invested in the stock. To be specific, they have kr126m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Selvaag Bolig Deserve A Spot On Your Watchlist?

Selvaag Bolig's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Selvaag Bolig for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Selvaag Bolig (1 is concerning) you should be aware of.

Although Selvaag Bolig certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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