Does FM Mattsson Mora Group (STO:FMM B) Deserve A Spot On Your Watchlist?

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 completely 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.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like FM Mattsson Mora Group (STO:FMM B). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for FM Mattsson Mora Group

FM Mattsson Mora Group's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Who among us would not applaud FM Mattsson Mora Group's stratospheric annual EPS growth of 45%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. FM Mattsson Mora Group shareholders can take confidence from the fact that EBIT margins are up from 11% to 18%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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 FM Mattsson Mora Group's balance sheet strength, before getting too excited.

Are FM Mattsson Mora Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that FM Mattsson Mora Group insiders spent kr743k on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Independent Director Håkan Broman for kr478k worth of shares, at about kr239 per share.

Along with the insider buying, another encouraging sign for FM Mattsson Mora Group is that insiders, as a group, have a considerable shareholding. With a whopping kr536m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 15% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Does FM Mattsson Mora Group Deserve A Spot On Your Watchlist?

FM Mattsson Mora Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest FM Mattsson Mora Group belongs on the top of your watchlist. Even so, be aware that FM Mattsson Mora Group is showing 1 warning sign in our investment analysis , you should know about...

As a growth investor I do like to see insider buying. But FM Mattsson Mora Group isn't the only one. You can see a a free list of them here.

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.