Here's Why We Think Avanza Bank Holding (STO:AZA) Might Deserve Your Attention Today

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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Avanza Bank Holding (STO:AZA), 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.

View our latest analysis for Avanza Bank Holding

How Fast Is Avanza Bank Holding Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Avanza Bank Holding's EPS has grown 23% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. 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. Avanza Bank Holding maintained stable EBIT margins over the last year, all while growing revenue 13% to kr3.7b. That's a real positive.

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Avanza Bank Holding's forecast profits?

Are Avanza Bank Holding 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that, in the last year, insiders sold kr816k worth of shares. But that's far less than the kr33m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Avanza Bank Holding'sfuture. It is also worth noting that it was 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. We note that their impressive stake in the company is worth kr5.7b. That equates to 17% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Is Avanza Bank Holding Worth Keeping An Eye On?

For growth investors, Avanza Bank Holding's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. However, before you get too excited we've discovered 1 warning sign for Avanza Bank Holding that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Avanza Bank Holding 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.