Should You Be Adding Swedencare (STO:SECARE) To Your Watchlist Today?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Swedencare (STO:SECARE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Swedencare

How Quickly Is Swedencare Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Swedencare's EPS has grown 34% each year, compound, over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Swedencare maintained stable EBIT margins over the last year, all while growing revenue 255% to kr616m. That's progress.

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.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Swedencare?

Are Swedencare Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Swedencare shares worth a considerable sum. Notably, they have an enormous stake in the company, worth kr2.9b. That equates to 15% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Swedencare with market caps between kr9.4b and kr30b is about kr6.7m.

The Swedencare CEO received total compensation of just kr2.1m in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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.

Does Swedencare Deserve A Spot On Your Watchlist?

For growth investors like me, Swedencare's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Each to their own, but I think all this makes Swedencare look rather interesting indeed. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Swedencare (1 is significant) you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.