If EPS Growth Is Important To You, Avanza Bank Holding (STO:AZA) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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.

See our latest analysis for Avanza Bank Holding

Avanza Bank Holding's Improving Profits

In the last three years Avanza Bank Holding's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Avanza Bank Holding's EPS has risen over the last 12 months, growing from kr10.76 to kr11.94. This amounts to a 11% gain; a figure that shareholders will be pleased to see.

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. It's noted that Avanza Bank Holding's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Avanza Bank Holding achieved similar EBIT margins to last year, revenue grew by a solid 13% to kr3.5b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Avanza Bank Holding?

Are Avanza Bank Holding Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold kr4.2m worth of shares. But that's far less than the kr16m insiders spent purchasing stock. This adds to the interest in Avanza Bank Holding because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Independent Chairman of the Board Sven Hagströmer who made the biggest single purchase, worth kr4.5m, paying kr224 per share.

Along with the insider buying, another encouraging sign for Avanza Bank Holding is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth kr5.0b. This totals to 18% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Does Avanza Bank Holding Deserve A Spot On Your Watchlist?

One important encouraging feature of Avanza Bank Holding is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. What about risks? Every company has them, and we've spotted 2 warning signs for Avanza Bank Holding you should know about.

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.

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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.