For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Mortgage Advice Bureau (Holdings) (LON:MAB1). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Mortgage Advice Bureau (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. Over twelve months, Mortgage Advice Bureau (Holdings) increased its EPS from UK£0.26 to UK£0.28. That's a modest gain of 9.1%.
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. Not all of Mortgage Advice Bureau (Holdings)'s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Mortgage Advice Bureau (Holdings)'s EBIT margins were flat over the last year, revenue grew by a solid 17% to UK£144m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Mortgage Advice Bureau (Holdings) EPS 100% free.
Are Mortgage Advice Bureau (Holdings) Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Not only did Mortgage Advice Bureau (Holdings) insiders refrain from selling stock during the year, but they also spent UK£49k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident.
On top of the insider buying, it's good to see that Mortgage Advice Bureau (Holdings) insiders have a valuable investment in the business. Indeed, they have a glittering mountain of wealth invested in it, currently valued at UK£94m. That equates to 30% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Is Mortgage Advice Bureau (Holdings) Worth Keeping An Eye On?
One important encouraging feature of Mortgage Advice Bureau (Holdings) is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. We should say that we've discovered 1 warning sign for Mortgage Advice Bureau (Holdings) that you should be aware of before investing here.
As a growth investor I do like to see insider buying. But Mortgage Advice Bureau (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.
This article by Simply Wall St is general in nature. 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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