Here's Why Avanza Bank Holding (STO:AZA) Has Caught The Eye Of Investors

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Avanza Bank Holding (STO:AZA). 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.

See our latest analysis for Avanza Bank Holding

How Fast Is Avanza Bank Holding Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. We can see that in the last three years Avanza Bank Holding grew its EPS by 6.4% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Avanza Bank Holding's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Avanza Bank Holding achieved similar EBIT margins to last year, revenue grew by a solid 13% to kr3.8b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Avanza Bank Holding's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Avanza Bank Holding Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The kr881k worth of shares that insiders sold during the last 12 months pales in comparison to the kr22m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about Avanza Bank Holding'sfuture. It is also worth noting that it was Non-Independent Chairman of the Board Sven Hagströmer who made the biggest single purchase, worth kr21m, paying kr202 per share.

The good news, alongside the insider buying, for Avanza Bank Holding bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at kr6.9b. Coming in at 17% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.

Does Avanza Bank Holding Deserve A Spot On Your Watchlist?

One important encouraging feature of Avanza Bank Holding is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We don't want to rain on the parade too much, but we did also find 1 warning sign for Avanza Bank Holding that you need to be mindful of.

The good news is that Avanza Bank Holding is not the only growth stock with insider buying. Here's a list of growth-focused companies in SE 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.

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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.