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

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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 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.

Check out our latest analysis for Scatec

How Quickly Is Scatec Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Scatec has grown EPS by 60% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Scatec shareholders can take confidence from the fact that EBIT margins are up from 34% to 50%, 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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Scatec's forecast profits?

Are Scatec Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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 Scatec insiders refrain from selling stock during the year, but they also spent kr1.6m buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Director Pal Kildemo who made the biggest single purchase, worth kr393k, paying kr78.65 per share.

On top of the insider buying, it's good to see that Scatec insiders have a valuable investment in the business. To be specific, they have kr235m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Terje Pilskog is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Scatec, with market caps between kr11b and kr34b, is around kr9.3m.

Scatec offered total compensation worth kr5.8m to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. 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.

Should You Add Scatec To Your Watchlist?

Scatec's earnings have taken off in quite an impressive fashion. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Scatec deserves timely attention. We don't want to rain on the parade too much, but we did also find 2 warning signs for Scatec (1 makes us a bit uncomfortable!) that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Scatec, you'll probably love this curated collection of companies in NO that have an attractive valuation alongside 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. 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.