Does Addnode Group (STO:ANOD B) Deserve A Spot On Your Watchlist?

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

Check out our latest analysis for Addnode Group

Addnode Group's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Addnode Group has grown EPS by 31% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. EBIT margins for Addnode Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 43% to kr6.9b. That's encouraging news for the company!

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.

Fortunately, we've got access to analyst forecasts of Addnode Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Addnode Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

In the last year insider at Addnode Group were both selling and buying shares; but happily, as a group they spent kr1.3m more on stock, than they netted from selling it. Shareholders who may have questioned insiders selling will find some reassurance in this fact. It is also worth noting that it was President of Process Management Division Andreas Wikholm who made the biggest single purchase, worth kr3.7m, paying kr95.00 per share.

The good news, alongside the insider buying, for Addnode Group bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have kr161m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 1.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Addnode Group Deserve A Spot On Your Watchlist?

You can't deny that Addnode Group has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Addnode Group , and understanding this should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Addnode Group, you'll probably love this free list of growing companies that insiders are buying.

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.