If EPS Growth Is Important To You, VBG Group (STO:VBG 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in VBG Group (STO:VBG B). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for VBG Group

How Fast Is VBG Group Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that VBG Group's EPS has grown 35% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of VBG Group shareholders is that EBIT margins have grown from 10% to 15% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check VBG Group's balance sheet strength, before getting too excited.

Are VBG Group 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did VBG Group insiders refrain from selling stock during the year, but they also spent kr1.3m buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was President Anders Erkén who made the biggest single purchase, worth kr516k, paying kr190 per share.

Should You Add VBG Group To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into VBG Group's strong EPS growth. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. To put it succinctly; VBG Group is a strong candidate for your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with VBG Group , and understanding it should be part of your investment process.

The good news is that VBG Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in SE 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.