Do Seamless Distribution Systems's (STO:SDS) Earnings Warrant Your Attention?

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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Seamless Distribution Systems (STO:SDS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Seamless Distribution Systems

Seamless Distribution Systems's Improving Profits

Over the last three years, Seamless Distribution Systems has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Seamless Distribution Systems's EPS soared from kr1.04 to kr1.50, in just one year. That's a commendable gain of 44%.

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). On the one hand, Seamless Distribution Systems's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Seamless Distribution Systems isn't a huge company, given its market capitalization of kr362m. That makes it extra important to check on its balance sheet strength.

Are Seamless Distribution Systems 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Seamless Distribution Systems shares, in the last year. With that in mind, it's heartening that Tommy Eriksson, the Chief Executive Officer of the company, paid kr311k for shares at around kr30.30 each.

Should You Add Seamless Distribution Systems To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Seamless Distribution Systems's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Seamless Distribution Systems is probably worth spending some time on. Still, you should learn about the 5 warning signs we've spotted with Seamless Distribution Systems (including 3 which can't be ignored) .

The good news is that Seamless Distribution Systems 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.

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This article by Simply Wall St is general in nature. 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.
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