Does Clemondo Group (STO:CLEM) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Clemondo Group (STO:CLEM). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Clemondo Group's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Clemondo Group has grown its trailing twelve month EPS from kr0.55 to kr0.59, in the last year. That's a fair increase of 8.2%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It was a year of stability for Clemondo Group as both revenue and EBIT margins remained have been flat over the past year. That's not bad, but it doesn't point to ongoing future growth, either.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Check out our latest analysis for Clemondo Group

Since Clemondo Group is no giant, with a market capitalisation of kr144m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Clemondo Group 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for Clemondo Group shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Chairman of the Board & Acting CEO Michael Engström bought kr99k worth of shares at an average price of around kr10.96. It seems that at least one insider is prepared to show the market there is potential within Clemondo Group.

It's commendable to see that insiders have been buying shares in Clemondo Group, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Clemondo Group, with market caps under kr1.9b is around kr3.0m.

The CEO of Clemondo Group was paid just kr300k in total compensation for the year ending December 2024. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Clemondo Group To Your Watchlist?

One positive for Clemondo Group is that it is growing EPS. That's nice to see. And there's more to Clemondo Group, with the insider buying and modest CEO pay being a great look for those with an eye on the company. If these factors aren't enough to secure Clemondo Group a spot on the watchlist, then it certainly warrants a closer look at the very least. You still need to take note of risks, for example - Clemondo Group has 1 warning sign we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Clemondo Group, you'll probably love this curated collection of companies in SE that have an attractive valuation alongside 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.