Here's Why We Think Nova Ljubljanska Banka d.d (LJSE:NLBR) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Nova Ljubljanska Banka d.d (LJSE:NLBR). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Nova Ljubljanska Banka d.d

How Fast Is Nova Ljubljanska Banka d.d Growing?

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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Nova Ljubljanska Banka d.d has grown EPS by 23% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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). I note that Nova Ljubljanska Banka d.d's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Nova Ljubljanska Banka d.d maintained stable EBIT margins over the last year, all while growing revenue 40% to €665m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Nova Ljubljanska Banka d.d's future profits.

Are Nova Ljubljanska Banka d.d Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Nova Ljubljanska Banka d.d with market caps between €900m and €2.9b is about €1.1m.

The Nova Ljubljanska Banka d.d CEO received total compensation of just €387k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Nova Ljubljanska Banka d.d Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Nova Ljubljanska Banka d.d's strong EPS growth. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So I'd venture it may well deserve a spot on your watchlist, or even a little further research. We don't want to rain on the parade too much, but we did also find 2 warning signs for Nova Ljubljanska Banka d.d (1 shouldn't be ignored!) that you need to be mindful of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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.