Do Scatec's (OB:SCATC) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Scatec (OB:SCATC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Scatec with the means to add long-term value to shareholders.

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How Fast Is Scatec Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Scatec grew its EPS from kr2.01 to kr15.81, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. EBIT margins have declined for Scatec, but revenue stability should provide some reassurance to shareholders. Shareholders will be hopeful that the company can buck this trend.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Check out our latest analysis for Scatec

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 Scatec's future profits.

Are Scatec Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We note that Scatec insiders spent kr766k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future.

It's reassuring that Scatec insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, Scatec has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Scatec with market caps between kr9.9b and kr32b is about kr9.4m.

Scatec offered total compensation worth kr6.5m to its CEO in the year to December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. 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 good governance, more generally.

Does Scatec Deserve A Spot On Your Watchlist?

Scatec's earnings have taken off in quite an impressive fashion. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Scatec may be at an inflection point. If so, then its potential for further gains probably merit a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for Scatec you should be aware of, and 2 of them are potentially serious.

Keen growth investors love to see insider activity. Thankfully, Scatec isn't the only one. You can see a a curated list of Norwegian companies which have exhibited consistent growth accompanied by high insider ownership.

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.