Should You Be Adding MGE Energy (NASDAQ:MGEE) 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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like MGE Energy (NASDAQ:MGEE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for MGE Energy
How Quickly Is MGE Energy Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years MGE Energy grew its EPS by 7.0% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the one hand, MGE Energy's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future may hold further growth, especially if EBIT margins can remain steady.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of MGE Energy's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are MGE Energy Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.
Not only did MGE Energy insiders refrain from selling stock during the year, but they also spent US$165k buying it. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Director James Berbee for US$80k worth of shares, at about US$74.86 per share.
Recent insider purchases of MGE Energy stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, MGE Energy has a very reasonable level of CEO pay. For companies with market capitalisations between US$2.0b and US$6.4b, like MGE Energy, the median CEO pay is around US$6.5m.
The CEO of MGE Energy only received US$2.6m in total compensation for the year ending December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is MGE Energy Worth Keeping An Eye On?
One important encouraging feature of MGE Energy is that it is growing profits. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. The sum of all that, points to a quality business, and a genuine prospect for further research. We don't want to rain on the parade too much, but we did also find 2 warning signs for MGE Energy that you need to be mindful of.
Keen growth investors love to see insider buying. Thankfully, MGE Energy isn't the only one. You can see a a free list of them here.
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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