Should You Be Adding Lifco (STO:LIFCO B) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Lifco (STO:LIFCO 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.

Check out the opportunities and risks within the SE Industrials industry.

Lifco'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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Lifco has managed to grow EPS by 23% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Lifco maintained stable EBIT margins over the last year, all while growing revenue 26% to kr21b. 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.

Fortunately, we've got access to analyst forecasts of Lifco's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Lifco Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Any way you look at it Lifco shareholders can gain quiet confidence from the fact that insiders shelled out kr6.0m to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was CEO, President & Director Per Waldemarson who made the biggest single purchase, worth kr3.1m, paying kr203 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Lifco will reveal that insiders own a significant piece of the pie. To be exact, company insiders hold 51% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. And their holding is extremely valuable at the current share price, totalling kr41b. That level of investment from insiders is nothing to sneeze at.

Should You Add Lifco To Your Watchlist?

You can't deny that Lifco has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. What about risks? Every company has them, and we've spotted 2 warning signs for Lifco (of which 1 doesn't sit too well with us!) you should know about.

Keen growth investors love to see insider buying. Thankfully, Lifco 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.