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

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Trelleborg (STO:TREL B). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Our analysis indicates that TREL B is potentially undervalued!

Trelleborg's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Trelleborg has grown EPS by 15% per year. That's a pretty good rate, if the company can sustain it.

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. Trelleborg maintained stable EBIT margins over the last year, all while growing revenue 50% to kr38b. 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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Trelleborg's future profits.

Are Trelleborg Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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.

Not only did Trelleborg insiders refrain from selling stock during the year, but they also spent kr1.4m buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. Zooming in, we can see that the biggest insider purchase was by Chief Financial Officer Fredrik Nilsson for kr959k worth of shares, at about kr215 per share.

Does Trelleborg Deserve A Spot On Your Watchlist?

As previously touched on, Trelleborg is a growing business, which is encouraging. Not every business can grow its EPS, but Trelleborg certainly can. The eye-catcher here is the reecnt insider share acquisitions which are undoubtedly enough to entice some investors to keep watch for the future. Even so, be aware that Trelleborg is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

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