We Ran A Stock Scan For Earnings Growth And Atlas Copco (STO:ATCO A) Passed With Ease

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Atlas Copco (STO:ATCO A). 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

Atlas Copco's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Atlas Copco grew its EPS by 8.6% per year. That's a pretty good rate, if the company can sustain it.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Atlas Copco remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 22% to kr131b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. 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 are reassured by the fact they have invested in the company. Given insiders own a significant chunk of shares, currently valued at kr568m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Should You Add Atlas Copco To Your Watchlist?

One important encouraging feature of Atlas Copco is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. We don't want to rain on the parade too much, but we did also find 1 warning sign for Atlas Copco that you need to be mindful of.

Although Atlas Copco 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.

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

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.