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

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Avanza Bank Holding with the means to add long-term value to shareholders.

View our latest analysis for Avanza Bank Holding

How Quickly Is Avanza Bank Holding Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Avanza Bank Holding's EPS has grown 30% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note Avanza Bank Holding achieved similar EBIT margins to last year, revenue grew by a solid 7.8% to kr3.6b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Avanza Bank Holding's future EPS 100% free.

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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Although we did see some insider selling (worth kr816k) this was overshadowed by a mountain of buying, totalling kr12m in just one year. We find this encouraging because it suggests they are optimistic about Avanza Bank Holding'sfuture. We also note that it was the Director, John Hedberg, who made the biggest single acquisition, paying kr5.1m for shares at about kr214 each.

Along with the insider buying, another encouraging sign for Avanza Bank Holding is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at kr5.8b. That equates to 17% of the company, making insiders powerful and aligned with other 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?

You can't deny that Avanza Bank Holding has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Avanza Bank Holding that you should be aware of.

The good news is that Avanza Bank Holding is not the only growth stock with insider buying. Here's a list of them... 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.