Here's Why Atlas Copco (STO:ATCO A) Has Caught The Eye Of Investors

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Atlas Copco (STO:ATCO A), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Atlas Copco with the means to add long-term value to shareholders.

Check out our latest analysis for Atlas Copco

How Fast Is Atlas Copco Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Atlas Copco has managed to grow EPS by 22% per year 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. Atlas Copco maintained stable EBIT margins over the last year, all while growing revenue 28% to kr168b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are Atlas Copco Insiders Aligned With All Shareholders?

Owing to the size of Atlas Copco, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. To be specific, they have kr326m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.04% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Atlas Copco Worth Keeping An Eye On?

For growth investors, Atlas Copco's raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Now, you could try to make up your mind on Atlas Copco by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Atlas Copco certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Swedish companies that not only boast of strong growth but have also seen recent insider buying..

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.