Does TF Bank (STO:TFBANK) Deserve A Spot On Your Watchlist?

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like TF Bank (STO:TFBANK). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for TF Bank

How Fast Is TF Bank Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that TF Bank has managed to grow EPS by 21% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. It's noted that TF Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. TF Bank maintained stable EBIT margins over the last year, all while growing revenue 27% to kr1.4b. That's progress.

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.

Fortunately, we've got access to analyst forecasts of TF Bank's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are TF Bank 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.

TF Bank insiders both bought and sold shares over the last twelve months, but they did end up spending kr353k more on stock than they received from selling it. So, on balance, the insider transactions are mildly encouraging. It is also worth noting that it was Chairman of the Board John Brehmer who made the biggest single purchase, worth kr2.1m, paying kr214 per share.

Along with the insider buying, another encouraging sign for TF Bank is that insiders, as a group, have a considerable shareholding. Indeed, they hold kr143m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 2.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Joakim Jansson, is paid less than the median for similar sized companies. For companies with market capitalisations between kr2.1b and kr8.3b, like TF Bank, the median CEO pay is around kr6.1m.

TF Bank's CEO took home a total compensation package worth kr5.2m in the year leading up to December 2023. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is TF Bank Worth Keeping An Eye On?

For growth investors, TF Bank'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 that this stock may well deserve a spot on your watchlist. Of course, just because TF Bank is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of TF Bank, you'll probably love this curated collection of companies in SE 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com