With EPS Growth And More, Nordic Semiconductor (OB:NOD) 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.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Nordic Semiconductor (OB:NOD). 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.

Check out our latest analysis for Nordic Semiconductor

How Fast Is Nordic Semiconductor Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Nordic Semiconductor's EPS has grown 24% each year, compound, over three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Nordic Semiconductor shareholders can take confidence from the fact that EBIT margins are up from 2.2% to 5.4%, and revenue is growing. That's great to see, on both counts.

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.

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 Nordic Semiconductor's future profits.

Are Nordic Semiconductor 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's good to see Nordic Semiconductor insiders walking the walk, by spending US$2.5m on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Chair of the Board of Directors Birger Steen who made the biggest single purchase, worth kr683k, paying kr54.61 per share.

The good news, alongside the insider buying, for Nordic Semiconductor bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$281m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 1.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Nordic Semiconductor Deserve A Spot On Your Watchlist?

For growth investors like me, Nordic Semiconductor's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So it's fair to say I think this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for Nordic Semiconductor that we have uncovered.

The good news is that Nordic Semiconductor is not the only growth stock with insider buying. Here's a list of them... 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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