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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Upsales Technology (STO:UPSALE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out the opportunities and risks within the SE Software industry.
How Fast Is Upsales Technology Growing Its Earnings Per Share?
In the last three years Upsales Technology's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Upsales Technology's EPS shot from kr0.53 to kr1.13, over the last year. It's not often a company can achieve year-on-year growth of 112%. That could be a sign that the business has reached a true inflection point.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Upsales Technology is growing revenues, and EBIT margins improved by 7.0 percentage points to 19%, over the last year. 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. Click on the chart to see the exact numbers.
Upsales Technology isn't a huge company, given its market capitalisation of kr1.2b. That makes it extra important to check on its balance sheet strength.
Are Upsales Technology 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's worth noting that there was some insider selling of Upsales Technology shares last year, worth kr2.6m. But this is outweighed by the trades from Founder Daniel Wikberg who spent kr4.1m buying shares, at an average price of around kr57.88. Overall, that is something good to take away.
On top of the insider buying, we can also see that Upsales Technology insiders own a large chunk of the company. Indeed, with a collective holding of 52%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have kr632m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Should You Add Upsales Technology To Your Watchlist?
Upsales Technology's earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Upsales Technology deserves timely attention. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Upsales Technology , and understanding it should be part of your investment process.
The good news is that Upsales Technology 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. 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.
Upsales Technology AB (publ) operates as a software-as-a-service company that develops and sells web-based business systems with a focus on sales, marketing, and analytics in Sweden and internationally.
Outstanding track record with exceptional growth potential.