If EPS Growth Is Important To You, AB Volvo (STO:VOLV B) Presents An Opportunity

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 currently lacks a track record of revenue and 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 AB Volvo (STO:VOLV B). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AB Volvo with the means to add long-term value to shareholders.

See our latest analysis for AB Volvo

How Quickly Is AB Volvo Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, AB Volvo has achieved impressive annual EPS growth of 38%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that AB Volvo's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note AB Volvo achieved similar EBIT margins to last year, revenue grew by a solid 22% to kr539b. That's encouraging news for the company!

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.

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 AB Volvo's future profits.

Are AB Volvo 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Although we did see some insider selling (worth kr3.4m) this was overshadowed by a mountain of buying, totalling kr250m in just one year. We find this encouraging because it suggests they are optimistic about AB Volvo'sfuture. Zooming in, we can see that the biggest insider purchase was by Director Helena Stjernholm for kr203m worth of shares, at about kr204 per share.

The good news, alongside the insider buying, for AB Volvo bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth kr1.1b. We note that this amounts to 0.2% of the company, which may be small owing to the sheer size of AB Volvo but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Does AB Volvo Deserve A Spot On Your Watchlist?

AB Volvo's earnings per share growth have been climbing higher at an appreciable rate. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe AB Volvo deserves timely attention. You still need to take note of risks, for example - AB Volvo has 3 warning signs (and 2 which are concerning) we think you should know about.

Keen growth investors love to see insider buying. Thankfully, AB Volvo isn't the only one. You can see a a curated list of Swedish companies which have exhibited consistent growth accompanied by recent insider 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.