Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Björn Borg (STO:BORG). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Björn Borg's Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Björn Borg has grown EPS by 13% per year. That's a pretty good rate, if the company can sustain it.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Björn Borg shareholders can take confidence from the fact that EBIT margins are up from 0.06% to 9.9%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Since Björn Borg is no giant, with a market capitalization of kr1.3b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Björn Borg Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Björn Borg shares, in the last year. With that in mind, it's heartening that Heiner Olbrich, the Independent Chairman of the Board of the company, paid kr298k for shares at around kr29.80 each.
On top of the insider buying, it's good to see that Björn Borg insiders have a valuable investment in the business. Indeed, they hold kr399m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 32% of the company; visible skin in the game.
Is Björn Borg Worth Keeping An Eye On?
As I already mentioned, Björn Borg is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. You still need to take note of risks, for example - Björn Borg has 1 warning sign we think you should be aware of.
The good news is that Björn Borg 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.
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.