Should You Be Adding Addtech AB (publ.) (STO:ADDT B) To Your Watchlist Today?

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Addtech AB (publ.) (STO:ADDT B), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Addtech AB (publ.)

Addtech AB (publ.)'s Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Addtech AB (publ.) grew its EPS by 17% per year. That's a good rate of growth, if it can be sustained.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Addtech AB (publ.) remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 28% to kr15b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are Addtech AB (publ.) Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Addtech AB (publ.) insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at kr3.0b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Addtech AB (publ.), with market caps between kr23b and kr72b, is around kr18m.

The Addtech AB (publ.) CEO received kr11m in compensation for the year ending March 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Addtech AB (publ.) To Your Watchlist?

One important encouraging feature of Addtech AB (publ.) is that it is growing profits. The fact that EPS is growing is a genuine positive for Addtech AB (publ.), but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. We don't want to rain on the parade too much, but we did also find 1 warning sign for Addtech AB (publ.) that you need to be mindful of.

Although Addtech AB (publ.) certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.