If EPS Growth Is Important To You, Intellego Technologies (STO:INT) Presents An Opportunity

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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Intellego Technologies (STO:INT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Intellego Technologies with the means to add long-term value to shareholders.

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Intellego Technologies' Improving Profits

In the last three years Intellego Technologies' 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. Intellego Technologies has grown its trailing twelve month EPS from kr2.36 to kr2.47, in the last year. That amounts to a small improvement of 4.5%.

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. On the one hand, Intellego Technologies' EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Intellego Technologies

Intellego Technologies isn't a huge company, given its market capitalisation of kr1.4b. That makes it extra important to check on its balance sheet strength .

Are Intellego Technologies Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell Intellego Technologies shares in the last year. But the important part is that Founder & CEO Claes Lindahl spent kr5.8m buying stock, at an average price of kr27.05. Big buys like that may signal an opportunity; actions speak louder than words.

On top of the insider buying, it's good to see that Intellego Technologies insiders have a valuable investment in the business. To be specific, they have kr174m worth of shares. This considerable investment should help drive long-term value in the business. That amounts to 12% of the company, demonstrating a degree of high-level alignment with shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Claes Lindahl is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Intellego Technologies with market caps under kr2.0b is about kr2.5m.

The Intellego Technologies CEO received kr1.6m in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Intellego Technologies Worth Keeping An Eye On?

As previously touched on, Intellego Technologies is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. However, before you get too excited we've discovered 2 warning signs for Intellego Technologies (1 is concerning!) that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Intellego Technologies isn't the only one. You can see a a curated list of Swedish companies which have exhibited consistent growth accompanied by high insider ownership.

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.