I Ran A Stock Scan For Earnings Growth And Investor (STO:INVE A) Passed With Ease

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Investor (STO:INVE A). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Investor

Investor's Improving Profits

In the last three years Investor's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Investor's EPS shot from kr23.61 to kr50.55, over the last year. You don't see 114% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

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. I note that Investor's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that Investor is growing revenues, and EBIT margins improved by 11.6 percentage points to 81%, over the last year. That's great to see, on both counts.

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

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Investor.

Are Investor Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, 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.

First things first; I didn't see insiders sell Investor shares in the last year. Even better, though, is that the Head of Patricia Industries, Christian Cederholm, bought a whopping kr2.8m worth of shares, paying about kr154 per share, on average. To me that means at least one insider thinks that the company is doing well - and they are backing that view with cash.

The good news, alongside the insider buying, for Investor bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enormous stake in the company, worth kr945m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Should You Add Investor To Your Watchlist?

Investor's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Investor deserves timely attention. Before you take the next step you should know about the 3 warning signs for Investor (2 can't be ignored!) that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Investor, 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.

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.

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