Does Train Alliance Sweden (STO:TRAIN B) Deserve A Spot On Your Watchlist?

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 completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Train Alliance Sweden (STO:TRAIN B). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

Check out our latest analysis for Train Alliance Sweden

Train Alliance Sweden's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Train Alliance Sweden grew its EPS by 4.9% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Train Alliance Sweden's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Train Alliance Sweden maintained stable EBIT margins over the last year, all while growing revenue 29% to kr162m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Train Alliance Sweden is no giant, with a market capitalization of kr1.1b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Train Alliance Sweden Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that, in the last year, insiders sold -kr30k worth of shares. But that's far less than the kr18m insiders spend purchasing stock. This makes me even more interested in Train Alliance Sweden because it suggests that those who understand the company best, are optimistic. We also note that it was the Director, Sven Jemsten, who made the biggest single acquisition, paying kr11m for shares at about kr57.04 each.

The good news, alongside the insider buying, for Train Alliance Sweden bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold kr161m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 14% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Train Alliance Sweden Worth Keeping An Eye On?

One important encouraging feature of Train Alliance Sweden is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. What about risks? Every company has them, and we've spotted 1 warning sign for Train Alliance Sweden you should know about.

The good news is that Train Alliance Sweden is not the only growth stock with insider buying. Here's a list of them... 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. 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.
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