Here's Why We Think Swedencare (STO:SECARE) Might Deserve Your Attention Today

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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

Check out the opportunities and risks within the SE Pharmaceuticals industry.

How Quickly Is Swedencare Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Swedencare's EPS has grown 29% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. On the revenue front, Swedencare has done well over the past year, growing revenue by 158% to kr1.6b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Swedencare's balance sheet strength, before getting too excited.

Are Swedencare 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's nice to see that there have been no reports of any insiders selling shares in Swedencare in the previous 12 months. With that in mind, it's heartening that Hakan Lagerberg, the Chief Executive Officer of the company, paid kr162k for shares at around kr80.77 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

On top of the insider buying, it's good to see that Swedencare insiders have a valuable investment in the business. Holding kr987m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 16% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Hakan Lagerberg is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between kr2.1b and kr8.5b, like Swedencare, the median CEO pay is around kr5.9m.

Swedencare's CEO took home a total compensation package worth kr3.1m in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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 Swedencare Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Swedencare's strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. Astute investors will want to keep this stock on watch. We should say that we've discovered 2 warning signs for Swedencare that you should be aware of before investing here.

Keen growth investors love to see insider buying. Thankfully, Swedencare 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.