Should You Be Adding Generic Sweden (STO:GENI) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. 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.

In contrast to all that, many investors prefer to focus on companies like Generic Sweden (STO:GENI), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Generic Sweden

How Quickly Is Generic Sweden Increasing Earnings Per Share?

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Generic Sweden's EPS has grown 33% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Generic Sweden maintained stable EBIT margins over the last year, all while growing revenue 9.1% to kr131m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Generic Sweden is no giant, with a market capitalisation of kr541m, you should definitely check its cash and debt before getting too excited about its prospects.

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 those who are interested in Generic Sweden will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 60% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at kr323m at the current share price. That's nothing to sneeze at!

Should You Add Generic Sweden To Your Watchlist?

You can't deny that Generic Sweden has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Generic Sweden's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 3 warning signs we've spotted with Generic Sweden (including 1 which is significant).

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 free list of them here.

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.