Is Now The Time To Put Generic Sweden (STO:GENI) On Your Watchlist?

By
Simply Wall St
Published
February 18, 2022
OM:GENI
Source: Shutterstock

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Generic Sweden (STO:GENI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Generic Sweden

How Quickly Is Generic Sweden Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Generic Sweden has grown EPS by 38% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Generic Sweden shareholders can take confidence from the fact that EBIT margins are up from 16% to 20%, and revenue is growing. That's great to see, on both counts.

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.

earnings-and-revenue-history
OM:GENI Earnings and Revenue History February 18th 2022

Generic Sweden isn't a huge company, given its market capitalization of kr688m. That makes it extra important to check on its balance sheet strength.

Are Generic Sweden Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Generic Sweden insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 60%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have kr414m invested in the business, using the current share price. That's nothing to sneeze at!

Does Generic Sweden Deserve A Spot On Your Watchlist?

Generic Sweden's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Generic Sweden for a spot on your watchlist. It is worth noting though that we have found 5 warning signs for Generic Sweden (1 is potentially serious!) that you need to take into consideration.

Although Generic Sweden certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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