If EPS Growth Is Important To You, AVTECH Sweden (STO:AVT B) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 AVTECH Sweden (STO:AVT B). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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AVTECH Sweden's Improving Profits

AVTECH Sweden has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. AVTECH Sweden boosted its trailing twelve month EPS from kr0.19 to kr0.23, in the last year. There's little doubt shareholders would be happy with that 25% gain.

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. While we note AVTECH Sweden achieved similar EBIT margins to last year, revenue grew by a solid 25% to kr43m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

See our latest analysis for AVTECH Sweden

AVTECH Sweden isn't a huge company, given its market capitalisation of kr573m. That makes it extra important to check on its balance sheet strength.

Are AVTECH Sweden Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One shining light for AVTECH Sweden is the serious outlay one insider has made to buy shares, in the last year. Specifically, the Chief Executive Officer, David Rytter, accumulated kr14m worth of shares at a price of kr6.90. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.

The good news, alongside the insider buying, for AVTECH Sweden bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have kr167m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 29% of the shares on issue for the business, an appreciable amount considering the market cap.

Does AVTECH Sweden Deserve A Spot On Your Watchlist?

As previously touched on, AVTECH Sweden is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. You should always think about risks though. Case in point, we've spotted 2 warning signs for AVTECH Sweden you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of AVTECH Sweden, 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.