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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Axfood (STO:AXFO), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
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Check out our latest analysis for Axfood
Axfood's Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Axfood has grown its trailing twelve month EPS from kr7.11 to kr7.48, in the last year. That amounts to a small improvement of 5.2%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Axfood maintained stable EBIT margins over the last year, all while growing revenue 3.8% to kr49b. That's progress.
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.
Fortunately, we've got access to analyst forecasts of Axfood's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Axfood 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We note that Axfood insiders spent kr621k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic.
Along with the insider buying, another encouraging sign for Axfood is that insiders, as a group, have a considerable shareholding. To be specific, they have kr349m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.