Here's Why I Think Byggmästare Anders J Ahlström Holding (STO:AJA B) Might Deserve Your Attention Today

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Byggmästare Anders J Ahlström Holding (STO:AJA B). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Byggmästare Anders J Ahlström Holding

Byggmästare Anders J Ahlström Holding's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Byggmästare Anders J Ahlström Holding grew its EPS from kr10.03 to kr83.44, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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). Not all of Byggmästare Anders J Ahlström Holding's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. The good news is that Byggmästare Anders J Ahlström Holding is growing revenues, and EBIT margins improved by 20.5 percentage points to 3.0%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Byggmästare Anders J Ahlström Holding isn't a huge company, given its market capitalization of kr2.6b. That makes it extra important to check on its balance sheet strength.

Are Byggmästare Anders J Ahlström Holding Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's a pleasure to note that insiders spent kr16m buying Byggmästare Anders J Ahlström Holding shares, over the last year, without reporting any share sales whatsoever. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. Zooming in, we can see that the biggest insider purchase was by Chief Executive Officer Tomas Bergstrom for kr14m worth of shares, at about kr195 per share.

Along with the insider buying, another encouraging sign for Byggmästare Anders J Ahlström Holding is that insiders, as a group, have a considerable shareholding. To be specific, they have kr416m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 16% of the company; visible skin in the game.

Should You Add Byggmästare Anders J Ahlström Holding To Your Watchlist?

Byggmästare Anders J Ahlström Holding's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Byggmästare Anders J Ahlström Holding belongs on the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Byggmästare Anders J Ahlström Holding (1 is a bit concerning) you should be aware of.

The good news is that Byggmästare Anders J Ahlström Holding 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.