Should You Be Adding Michelmersh Brick Holdings (LON:MBH) To Your Watchlist Today?
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Michelmersh Brick Holdings (LON:MBH). While profit is not necessarily a social good, it's easy to admire a business that 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.
See our latest analysis for Michelmersh Brick Holdings
How Fast Is Michelmersh Brick Holdings Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Michelmersh Brick Holdings boosted its trailing twelve month EPS from UK£0.053 to UK£0.064, in the last year. I doubt many would complain about that 21% gain.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Michelmersh Brick Holdings shareholders can take confidence from the fact that EBIT margins are up from 15% to 17%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Michelmersh Brick Holdings.
Are Michelmersh Brick Holdings Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The good news for Michelmersh Brick Holdings shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Non-Executive Director Paula Hay-Plumb bought UK£22k worth of shares at an average price of around UK£1.27.
On top of the insider buying, it's good to see that Michelmersh Brick Holdings insiders have a valuable investment in the business. To be specific, they have UK£34m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 29% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Frank Hanna, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Michelmersh Brick Holdings with market caps between UK£77m and UK£306m is about UK£482k.
Michelmersh Brick Holdings offered total compensation worth UK£385k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.
Does Michelmersh Brick Holdings Deserve A Spot On Your Watchlist?
One positive for Michelmersh Brick Holdings is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Even so, be aware that Michelmersh Brick Holdings is showing 2 warning signs in our investment analysis , you should know about...
As a growth investor I do like to see insider buying. But Michelmersh Brick Holdings 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.
