If EPS Growth Is Important To You, Sweco (STO:SWEC B) Presents An Opportunity

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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sweco (STO:SWEC 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.

Check out our latest analysis for Sweco

How Fast Is Sweco 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. Sweco managed to grow EPS by 6.5% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. EBIT margins for Sweco remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.3% to kr23b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Sweco's future EPS 100% free.

Are Sweco 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Even though some insiders sold down their holdings, their actions speak louder than words with kr8.0m more invested than sold by people who know they company best. You could argue that level of buying implies genuine confidence in the business. We also note that it was the President, Asa Bergman, who made the biggest single acquisition, paying kr3.2m for shares at about kr129 each.

On top of the insider buying, it's good to see that Sweco insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at kr773m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Should You Add Sweco To Your Watchlist?

One important encouraging feature of Sweco is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Still, you should learn about the 1 warning sign we've spotted with Sweco.

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