It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like NCC (STO:NCC B). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.
How Fast Is NCC Growing Its Earnings Per Share?
In the last three years NCC's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. NCC boosted its trailing twelve month EPS from kr11.69 to kr12.93, in the last year. That's a 11% gain; respectable growth in the broader scheme of things.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). NCC's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of NCC's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are NCC 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite -kr156k worth of sales, NCC insiders have overwhelmingly been buying the stock, spending kr4.4m on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. It is also worth noting that it was President & CEO Tomas Carlsson who made the biggest single purchase, worth kr955k, paying kr154 per share.
Should You Add NCC To Your Watchlist?
One positive for NCC is that it is growing EPS. That's nice to see. While some companies are struggling to grow EPS, NCC seems free from that morose affliction. The gravy on the mushroom pie is the insider buying, which has me tasting potential opportunity; one for the watchlist, I'd posit. You still need to take note of risks, for example - NCC has 1 warning sign we think you should be aware of.
As a growth investor I do like to see insider buying. But NCC 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.