Here's Why We Think Afry (STO:AFRY) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Afry (STO:AFRY), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Afry with the means to add long-term value to shareholders.

See our latest analysis for Afry

How Fast Is Afry Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Afry managed to grow EPS by 8.0% per year, over three years. 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. While we note Afry achieved similar EBIT margins to last year, revenue grew by a solid 19% to kr25b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Afry?

Are Afry 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Even though some insiders sold down their holdings, their actions speak louder than words with kr5.4m more invested than sold by people who know they company best. An optimistic sign for those with Afry in their watchlist. It is also worth noting that it was Independent Director Henrik Ehrnrooth who made the biggest single purchase, worth kr121m, paying kr172 per share.

Should You Add Afry To Your Watchlist?

One positive for Afry is that it is growing EPS. That's nice to see. While some companies are struggling to grow EPS, Afry seems free from that morose affliction. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Afry , and understanding it should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Afry isn't the only one. You can see a a free list of them here.

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.