Do Troax Group's (STO:TROAX) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

In contrast to all that, many investors prefer to focus on companies like Troax Group (STO:TROAX), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Troax Group

How Quickly Is Troax Group Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Troax Group has managed to grow EPS by 19% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Troax Group maintained stable EBIT margins over the last year, all while growing revenue 51% to €267m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Troax Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Despite €602k worth of sales, Troax Group insiders have overwhelmingly been buying the stock, spending €4.1m on purchases in the last twelve months. This overall confidence in the company at current the valuation signals their optimism. It is also worth noting that it was CEO, President & Director Thomas Widstrand who made the biggest single purchase, worth kr2.2m, paying kr218 per share.

Along with the insider buying, another encouraging sign for Troax Group is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at €737m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Troax Group's CEO, Thomas Widstrand, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between €985m and €3.2b, like Troax Group, the median CEO pay is around €919k.

Troax Group offered total compensation worth €777k to its CEO in the year to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Troax Group Deserve A Spot On Your Watchlist?

For growth investors, Troax Group's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Troax Group that you should be aware of.

The good news is that Troax Group 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. 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.