We Ran A Stock Scan For Earnings Growth And Concentric (STO:COIC) Passed With Ease

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Concentric (STO:COIC), which has not only revenues, but also profits. 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.

View our latest analysis for Concentric

Concentric's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Concentric has managed to grow EPS by 20% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. While we note Concentric achieved similar EBIT margins to last year, revenue grew by a solid 62% to kr4.2b. That's encouraging news for the company!

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Concentric's balance sheet strength, before getting too excited.

Are Concentric 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.

Shareholders in Concentric will be more than happy to see insiders committing themselves to the company, spending kr2.5m on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. We also note that it was the President & CEO, Martin Kunz, who made the biggest single acquisition, paying kr736k for shares at about kr184 each.

It's reassuring that Concentric insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Concentric, with market caps between kr4.3b and kr17b, is around kr8.8m.

The Concentric CEO received kr7.0m in compensation for the year ending December 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 good governance, more generally.

Should You Add Concentric To Your Watchlist?

You can't deny that Concentric has grown its earnings per share at a very impressive rate. That's attractive. To add to the positives, Concentric has recorded instances of insider buying and a modest executive pay to boot. All in all, this stock is worth the time to delve deeper into the details. You still need to take note of risks, for example - Concentric has 1 warning sign we think you should be aware of.

The good news is that Concentric is not the only growth stock with insider buying. Here's a list of them... with 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.