Is Now The Time To Put Husqvarna (STO:HUSQ B) On Your Watchlist?

By
Simply Wall St
Published
July 25, 2021
OM:HUSQ B
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Husqvarna (STO:HUSQ B), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Husqvarna

How Quickly Is Husqvarna Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. We can see that in the last three years Husqvarna grew its EPS by 12% 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). The good news is that Husqvarna is growing revenues, and EBIT margins improved by 4.4 percentage points to 13%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
OM:HUSQ B Earnings and Revenue History July 25th 2021

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Husqvarna EPS 100% free.

Are Husqvarna Insiders Aligned With All Shareholders?

Since Husqvarna has a market capitalization of kr69b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. To be specific, they have kr127m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Husqvarna Worth Keeping An Eye On?

As I already mentioned, Husqvarna is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Before you take the next step you should know about the 1 warning sign for Husqvarna that we have uncovered.

Although Husqvarna certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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. 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.
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