Is Now The Time To Put engcon (STO:ENGCON B) On Your Watchlist?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 engcon (STO:ENGCON B), 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 engcon with the means to add long-term value to shareholders.

View our latest analysis for engcon

How Quickly Is engcon Increasing Earnings Per Share?

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. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, engcon has grown EPS by 31% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. While we note engcon achieved similar EBIT margins to last year, revenue grew by a solid 21% to kr2.1b. That's progress.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for engcon.

Are engcon 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling engcon shares, in the last year. So it's definitely nice that company insider Kristian Sjostrom bought kr76k worth of shares at an average price of around kr76.30. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in engcon.

On top of the insider buying, we can also see that engcon insiders own a large chunk of the company. In fact, they own 69% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. This insider holding amounts to This is an incredible endorsement from them.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because engcon's CEO, Krister Blomgren, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between kr4.2b and kr17b, like engcon, the median CEO pay is around kr8.1m.

engcon offered total compensation worth kr4.6m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add engcon To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into engcon's strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. Now, you could try to make up your mind on engcon by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that engcon 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.