It is only natural that many investors, especially those who are new to the game, prefer to buy shares in “sexy” stocks with a good history, even if these companies lose money. And in their study with the title Who falls victim to the wolf on Wall Street? ‘ Leuz et. al. found that it is “quite common” for investors to lose money on buying into “pump and dump” systems.

In an age of tech-stock blue-sky investing, my choice may seem old-fashioned; I still prefer profitable companies like Provide IT Sweden (NGM: PROVIT). Although profit is not necessarily a social benefit, it is easy to admire a company that can consistently produce it. While a well-funded company can suffer losses for years, unless its owner has an endless appetite to subsidize the customer, it will need to generate a profit eventually, or else exhale its last breath.

See our latest analysis for Provide IT Sweden

How fast is Provide IT Sweden growing its earnings per share?

Even with a very modest growth rate, a company will usually do well if it improves earnings per share (EPS) year after year. So it is no surprise that some investors are more inclined to invest in profitable companies. As the last fireworks display on New Year’s Eve that accelerates towards the sky, Provide IT Sweden’s EPS shot from SEK 0.26 to SEK 0.58 in the past year. You do not see 125% annual growth that way, especially often.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get a new perspective on the quality of the company’s growth. Give IT Sweden shareholders can take confidence from the fact that EBIT margins are up from 9.3% to 18%, and revenues are growing. Checking the two boxes is a good sign of growth, in my book.

The diagram below shows how the company’s bottom and top lines have developed over time. Click on the chart to see the exact numbers.

Provide IT Sweden is not a giant company, with a market capitalization of SEK 48 million. This makes it extra important to check its balance sheet strength.

Are Provide IT Sweden insiders in line with all shareholders?

Many believe that high insider ownership is a strong sign of equality between a company’s manager and ordinary shareholders. As you can imagine, the fact that Provide IT Sweden insiders own a significant number of shares really appeals to me. In fact, they own 64% of the company, so they will share the same pleasures and challenges that ordinary shareholders experience. For me, this is a good sign because it indicates that they will have incentives to build value for shareholders in the long run. Of course, Provide IT Sweden is a very small company, with a market capitalization of only SEK 48 million. So despite a large proportional holding, insiders only have SEK 31 million in stock. It may not be a huge sum but it should be enough to keep insiders motivated!

Is Provide IT Sweden worth keeping an eye on?

Give IT Sweden earnings per share have gained momentum like a rocket aimed straight at the moon. That kind of growth is nothing short of eye-catching, and the huge investment held by insiders really gilds my view of the company. Sometimes rapid EPS growth is a sign that the business has reached a turning point; and I like them. So in my opinion, Provide IT Sweden is worth adding to your watch list; after all, shareholders are doing well when the market underestimates fast-growing companies. Before taking the next step, you should know 5 warning signs for Provide IT Sweden (2 should not be ignored!) As we have discovered.

You can invest in any company you want. But if you prefer to focus on stocks that have shown insider buying, here is a list of companies with insider buying over the past three months.

Note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst forecasts only using an impartial method and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any shares and does not take into account your goals or your financial situation. We strive to provide you with long-term focused analysis driven by basic data. Please note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the shares mentioned.

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