For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.
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 Swedbank (STO:SWED A). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Swedbank with the means to add long-term value to shareholders.
View our latest analysis for Swedbank
Swedbank's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Swedbank's EPS has grown 19% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Our analysis has highlighted that Swedbank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Swedbank achieved similar EBIT margins to last year, revenue grew by a solid 8.9% to kr74b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Swedbank's forecast profits?
Are Swedbank 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. 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 do note that, in the last year, insiders sold kr328k worth of shares. But that's far less than the kr26m insiders spent purchasing stock. This adds to the interest in Swedbank because it suggests that those who understand the company best, are optimistic. We also note that it was the Director, Goran Bengtsson, who made the biggest single acquisition, paying kr25m for shares at about kr213 each.
It's reassuring that Swedbank insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to Swedbank, with market caps over kr88b, is around kr28m.
Swedbank offered total compensation worth kr18m to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Swedbank To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Swedbank's strong EPS growth. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. All in all, this stock is worth the time to delve deeper into the details. Still, you should learn about the 2 warning signs we've spotted with Swedbank (including 1 which is concerning).
The good news is that Swedbank is not the only stock with insider buying. Here's a list of small cap, undervalued companies in SE 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. 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.
About OM:SWED A
Swedbank
Provides various banking products and services to private and corporate customers in Sweden, Estonia, Latvia, Lithuania, Norway, the United States, Finland, Denmark, Luxembourg, and China.
Undervalued established dividend payer.