Should You Be Adding Mewah International (SGX:MV4) To Your Watchlist Today?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Mewah International (SGX:MV4), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Mewah International
Mewah International's Improving Profits
In the last three years Mewah International's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Mewah International's EPS shot up from US$0.053 to US$0.076; a result that's bound to keep shareholders happy. That's a commendable gain of 42%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Mewah International remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 25% to US$5.4b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Mewah International's balance sheet strength, before getting too excited.
Are Mewah International Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
First things first, there weren't any reports of insiders selling shares in Mewah International in the last 12 months. But the important part is that COO, Head of Consumer Pack Segment & Executive Director Hui Hsin Cheo spent US$645k buying stock, at an average price of US$0.43. Big buys like that may signal an opportunity; actions speak louder than words.
On top of the insider buying, it's good to see that Mewah International insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at US$102m, they have plenty of motivation to push the business to succeed. Amounting to 22% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
Is Mewah International Worth Keeping An Eye On?
You can't deny that Mewah International has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. These things considered, this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Mewah International (at least 2 which shouldn't be ignored) , and understanding these should be part of your investment process.
The good news is that Mewah International 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only 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 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.
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