Here's Why We Think Boliden (STO:BOL) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Boliden (STO:BOL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Boliden with the means to add long-term value to shareholders.

Check out the opportunities and risks within the SE Metals and Mining industry.

How Fast Is Boliden Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Boliden has managed to grow EPS by 25% per year 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. The music to the ears of Boliden shareholders is that EBIT margins have grown from 16% to 19% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, 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 Boliden.

Are Boliden 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Despite some Boliden insiders disposing of some shares, we note that there was kr1.1m more in buying interest among those who know the company best On balance, that's a good sign. It is also worth noting that it was President & CEO Mikael Staffas who made the biggest single purchase, worth kr794k, paying kr397 per share.

It's commendable to see that insiders have been buying shares in Boliden, but there is more evidence of shareholder friendly management. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Boliden, with market caps over kr85b, is about kr26m.

The Boliden CEO received kr16m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Boliden Worth Keeping An Eye On?

For growth investors, Boliden's raw rate of earnings growth is a beacon in the night. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. The overriding message from this quick rundown is yes, this stock is worth investigating further. You should always think about risks though. Case in point, we've spotted 2 warning signs for Boliden you should be aware of, and 1 of them is a bit unpleasant.

The good news is that Boliden 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.