Does Macquarie Technology Group (ASX:MAQ) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Macquarie Technology Group (ASX:MAQ), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Macquarie Technology Group with the means to add long-term value to shareholders.
See our latest analysis for Macquarie Technology Group
How Fast Is Macquarie Technology Group Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Macquarie Technology Group has grown EPS by 4.6% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Macquarie Technology Group is growing revenues, and EBIT margins improved by 4.0 percentage points to 11%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Macquarie Technology Group's future profits.
Are Macquarie Technology Group 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, small purchases are not always indicative of conviction, and insiders don't always get it right.
The good news for Macquarie Technology Group shareholders is that no insiders reported selling shares in the last year. Add in the fact that Lisa Brock, the Independent Non-executive Director of the company, paid AU$63k for shares at around AU$57.20 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Macquarie Technology Group.
On top of the insider buying, we can also see that Macquarie Technology Group insiders own a large chunk of the company. Owning 48% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. That means they have plenty of their own capital riding on the performance of the business!
Should You Add Macquarie Technology Group To Your Watchlist?
One important encouraging feature of Macquarie Technology Group 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 your watchlist - and arguably a research priority. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Macquarie Technology Group , and understanding this should be part of your investment process.
The good news is that Macquarie Technology Group is not the only growth stock with insider buying. Here's a list of growth-focused companies in AU 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.
