With EPS Growth And More, Skanska (STO:SKA B) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Skanska (STO:SKA B). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Skanska

How Fast Is Skanska 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 means EPS growth is considered a real positive by most successful long-term investors. Skanska managed to grow EPS by 11% per year, over three years. That's a pretty good rate, if the company can sustain it.

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 Skanska achieved similar EBIT margins to last year, revenue grew by a solid 13% to kr163b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Skanska?

Are Skanska 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.

The real kicker here is that Skanska insiders spent a staggering kr24m on acquiring shares in just one year, without single share being sold in the meantime. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. It is also worth noting that it was President & CEO Anders Danielsson who made the biggest single purchase, worth kr1.7m, paying kr173 per share.

The good news, alongside the insider buying, for Skanska bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a significant chunk of shares, currently valued at kr551m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Is Skanska Worth Keeping An Eye On?

One positive for Skanska is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That makes the company a prime candidate for your watchlist - and arguably a research priority. You should always think about risks though. Case in point, we've spotted 2 warning signs for Skanska you should be aware of, and 1 of them makes us a bit uncomfortable.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Skanska, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.