With EPS Growth And More, Teqnion (STO:TEQ) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Teqnion (STO:TEQ). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Teqnion

How Fast Is Teqnion Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Teqnion's EPS have grown from kr3.11 to kr3.85 over twelve months. I doubt many would complain about that 24% gain.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Teqnion maintained stable EBIT margins over the last year, all while growing revenue 25% to kr814m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Teqnion isn't a huge company, given its market capitalization of kr2.2b. That makes it extra important to check on its balance sheet strength.

Are Teqnion Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Teqnion insiders have a significant amount of capital invested in the stock. With a whopping kr522m worth of shares as a group, insiders have plenty riding on the company's success. At 23% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations between kr904m and kr3.6b, like Teqnion, the median CEO pay is around kr3.5m.

Teqnion offered total compensation worth kr2.7m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Teqnion Worth Keeping An Eye On?

As I already mentioned, Teqnion is a growing business, which is what I like to see. The fact that EPS is growing is a genuine positive for Teqnion, but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. Before you take the next step you should know about the 1 warning sign for Teqnion that we have uncovered.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.