Here’s why Rockwool (CPH:ROCK B) has caught investors’ attention

For beginners, it may seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profits. But the reality is that when a company loses money every year, for long enough, its investors usually take on their share of those losses. A loss-making company has not yet proven itself in terms of profits and, eventually, the inflow of external capital may dry up.

If this type of business is not your style, and you like businesses that generate revenue, or even profit, then you may well be interested in Rockwool (CPH: ROCK B). Although profit is not the only metric to consider when investing, it is worth recognizing companies that can produce it consistently.

See our latest analysis for rock wool

Rockwool’s earnings per share are growing

The market is a voting machine in the short term, but a weighing machine in the long term, so we can expect the stock price to eventually follow earnings per share (EPS) results. Therefore, many investors like to buy stocks of companies with growing EPS. Impressively, Rockwool has grown its EPS by 19% per year, compound, over the past three years. Generally, we would say that if a company can keep up that a kind of growth, shareholders will be beaming.

It’s often useful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another view of the quality of the company’s growth. Note that although EBIT margins improved from 10% to 16%, the company actually recorded a drop in turnover of 4.6%. While not disastrous, these numbers could be better.

You can take a look at the company’s revenue and earnings growth trend in the chart below. For more details, click on the image.

You don’t drive with your eyes glued to the rearview mirror, so this might be of more interest to you free report showing analyst forecasts for Rockwool’s future profits.

Are Rockwool insiders aligned with all shareholders?

Due to Rockwool’s size, we don’t expect insiders to own a significant stake in the company. But we are reassured that they have invested in the company. In particular, they hold an enviable stake in the company, worth 2.4 billion euros. This suggests that managers will be very attentive to the interests of shareholders when making decisions!

Is rock wool worth keeping an eye on?

There’s no denying that Rockwool has been growing its earnings per share at a very impressive rate. It’s attractive. With EPS growth rates like that, it’s not surprising to see the company’s executives place their trust in the company by continuing to hold a significant investment. The growth and insider confidence are well regarded, so it is worth investigating further to discern the true value of the stock. Although we have looked at the quality of the earnings, we have not yet done any valuation work on the stock. So if you like to buy low, you might want to check whether Rockwool is trading on a high P/E or a low P/E, relative to its industry.

It is still possible to succeed by buying stocks that are not growing income and not have insiders buying shares. But for those who consider these parameters important, we encourage you to consult companies that TO DO have these characteristics. You can access a personalized list of Danish companies that have demonstrated growth supported by significant insider holdings.

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

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. 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 stocks mentioned.

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