We did a stock scan for earnings growth and Generic Sweden (STO:GENI) went hand in hand
The thrill of investing in a company that can turn its fortunes around is a big draw for some speculators, so even companies with no revenue, no profit and no bottom line can manage to find investors. Unfortunately, these high-risk investments often have little likelihood of ever paying off, and many investors pay a price for learning their lesson. Loss-making companies can act as a sponge for capital – so investors should be careful not to throw good money after bad.
If this type of business is not your style, you like businesses that generate revenue and even make a profit, then you may well be interested in Generic Sweden (STO:GENI). While profit is not the only metric that should be considered when investing, it is worth recognizing companies that can consistently produce it.
See our latest analysis for Generic Sweden
How fast is Generic Sweden increasing earnings per share?
Generally speaking, companies that experience growth in earnings per share (EPS) should see similar trends in share price. This means that EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Generic Sweden has achieved an impressive annualized earnings per share of 42%, compounded, over the past three years. That kind of growth rarely lasts long, but it’s well worth paying attention to when it happens.
One way to double-check a company’s growth is to look at how its earnings and margins before interest and taxes (EBIT) are changing. Generic Sweden maintained stable EBIT margins over the past year, while revenues increased by 33% to SEK 120 million. That’s progress.
In the chart below, you can see how the company has grown revenue and earnings, over time. To see the actual numbers, click on the chart.
Generic Sweden is not a large company considering its market capitalization of SEK 461 million. That makes it extra important to check its balance sheet strength.
Are Generic Sweden Insiders in line with all shareholders?
Seeing insiders own a large portion of the issued shares is often a good sign. Their incentives will be aligned with the investors and there is less likelihood of a sudden sell-off that would affect the share price. As you can imagine, the fact that Generic Sweden insiders own a significant number of shares is really appealing. In fact, they own 58% of the company, so they will share the same pleasures and challenges that the common shareholders experience. This makes it clear that they will be incentivized to plan for the long term – a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders’ holdings in the business is valued at SEK 265 million at the current share price. So there’s plenty there to keep them focused!
Should you add Generic Sweden to your watchlist?
Generic Sweden’s results have taken off quite impressively. This EPS growth is certainly attention-grabbing, and the large insider ownership only serves to further pique our interest. Sometimes rapid EPS growth is a sign that the business has reached a turning point, so there’s a potential opportunity to be had here. So based on this quick analysis, we think it’s worth considering Generic Sweden for a spot on your watch list. Don’t forget that there may still be risks. For example, we have identified 2 warning signs for Generic Sweden which you should be aware of.
The beauty of investing is that you can invest in almost 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 in the past three months.
Note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Do you have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, you can email editors (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only by 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 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 fundamental data. Note that our analysis may not take into account recent price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Discounted cash flow calculation for each share
Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of a company, just search here. Its free.