Here's Why Swedish Orphan Biovitrum (STO:SOBI) Has Caught The Eye Of Investors

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Swedish Orphan Biovitrum (STO:SOBI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is Swedish Orphan Biovitrum Growing?

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. Swedish Orphan Biovitrum managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. The music to the ears of Swedish Orphan Biovitrum shareholders is that EBIT margins have grown from 19% to 24% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Check out our latest analysis for Swedish Orphan Biovitrum

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Swedish Orphan Biovitrum's forecast profits?

Are Swedish Orphan Biovitrum Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a kr108b company like Swedish Orphan Biovitrum. But we are reassured by the fact they have invested in the company. Indeed, they hold kr331m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Swedish Orphan Biovitrum To Your Watchlist?

As previously touched on, Swedish Orphan Biovitrum is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Swedish Orphan Biovitrum is trading on a high P/E or a low P/E, relative to its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Swedish companies which have demonstrated growth backed by significant insider holdings.

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.