Here's Why We Think New Wave Group (STO:NEWA B) Might Deserve Your Attention Today

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like New Wave Group (STO:NEWA B). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for New Wave Group

New Wave Group's Earnings Per Share Are Growing

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. That makes EPS growth an attractive quality for any company. Recognition must be given to the that New Wave Group has grown EPS by 58% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. New Wave Group shareholders can take confidence from the fact that EBIT margins are up from 15% to 17%, and revenue is growing. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. 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 New Wave Group's future profits.

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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Although we did see some insider selling (worth kr5.4m) this was overshadowed by a mountain of buying, totalling kr16m in just one year. This bodes well for New Wave Group as it highlights the fact that those who are important to the company having a lot of faith in its future. We also note that it was the Founder, Torsten Jansson, who made the biggest single acquisition, paying kr7.6m for shares at about kr141 each.

The good news, alongside the insider buying, for New Wave Group bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping kr623m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

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. Our analysis has discovered that the median total compensation for the CEOs of companies like New Wave Group with market caps between kr4.3b and kr17b is about kr8.8m.

The CEO of New Wave Group only received kr1.2m in total compensation for the year ending December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is New Wave Group Worth Keeping An Eye On?

New Wave Group's earnings have taken off in quite an impressive fashion. 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. However, before you get too excited we've discovered 3 warning signs for New Wave Group (2 can't be ignored!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of New Wave Group, you'll probably love this free list of growing companies that insiders are 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.