RKT Stock – I Ran A Stock Scan For Earnings Growth And ADDvise Group (STO:ADDV A) Passed With Ease
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 Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.
So if you’re like me, you might be more interested in profitable, growing companies, like ADDvise Group (STO:ADDV A). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Check out our latest analysis for ADDvise Group
How Fast Is ADDvise Group Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that ADDvise Group’s EPS went from kr0.016 to kr0.19 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. This approach makes ADDvise Group look pretty good, on balance; although revenue is flattish, EBIT margins improved from 3.6% to 9.2% in the last year. That’s a real positive.
The chart below shows how the company’s bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since ADDvise Group is no giant, with a market capitalization of kr452m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are ADDvise Group Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
Not only did ADDvise Group insiders refrain from selling stock during the year, but they also spent kr1.2m buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was Independent Chairman Staffan Torstensson who made the biggest single purchase, worth kr1.0m, paying kr2.10 per share.
And the insider buying isn’t the only sign of alignment between shareholders and the board, since ADDvise Group insiders own more than a third of the company. Actually, with 50% of the company to their names, insiders are profoundly invested in the business. I’m reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have kr228m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Is ADDvise Group Worth Keeping An Eye On?
ADDvise Group’s earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe ADDvise Group deserves timely attention. However, before you get too excited we’ve discovered 5 warning signs for ADDvise Group that you should be aware of.
The good news is that ADDvise Group 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.
When trading ADDvise Group or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.