Is Now The Time To Put Sweco (STO:SWEC B) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Sweco (STO:SWEC B). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Sweco

Sweco'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 you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Sweco managed to grow EPS by 4.6% 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.

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. 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 12% to kr23b. That's progress.

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

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

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 kr6.3m more invested than sold by people who know they company best. This overall confidence in the company at current the valuation signals their optimism. It is also worth noting that it was President Asa Bergman who made the biggest single purchase, worth kr3.2m, paying kr129 per share.

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 kr1.0b, 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.

Should You Add Sweco To Your Watchlist?

One important encouraging feature of Sweco is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. However, before you get too excited we've discovered 1 warning sign for Sweco that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Sweco, 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.

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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.