Here's Why New Wave Group (STO:NEWA B) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to 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. 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 New Wave Group (STO:NEWA B), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for New Wave Group

How Quickly Is New Wave Group Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, New Wave Group has achieved impressive annual EPS growth of 60%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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 good news is that New Wave Group is growing revenues, and EBIT margins improved by 2.2 percentage points to 17%, 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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for New Wave Group.

Are New Wave Group 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. 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 do note that, in the last year, insiders sold kr5.4m worth of shares. But that's far less than the kr61m insiders spent purchasing stock. This adds to the interest in New Wave Group because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Founder Torsten Jansson who made the biggest single purchase, worth kr25m, paying kr88.41 per share.

The good news, alongside the insider buying, for New Wave Group bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth kr3.6b. This totals to 35% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because New Wave Group's CEO, Torsten Jansson, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to New Wave Group, with market caps between kr4.4b and kr18b, is around kr9.0m.

New Wave Group's CEO took home a total compensation package of kr1.2m in the year prior to December 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is New Wave Group Worth Keeping An Eye On?

New Wave Group's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest New Wave Group belongs near the top of your watchlist. Even so, be aware that New Wave Group is showing 3 warning signs in our investment analysis , and 2 of those are significant...

Keen growth investors love to see insider buying. Thankfully, New Wave Group 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.