Does Monadelphous Group (ASX:MND) Deserve A Spot On Your Watchlist?
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 currently lacks a track record of revenue and profit. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Monadelphous Group (ASX:MND). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Monadelphous Group
How Quickly Is Monadelphous Group Increasing Earnings Per Share?
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. Monadelphous Group managed to grow EPS by 10% per year, over three years. That's a good rate of growth, if it can be sustained.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Monadelphous Group maintained stable EBIT margins over the last year, all while growing revenue 7.0% to AU$1.8b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
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 Monadelphous Group's future profits.
Are Monadelphous Group Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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 Monadelphous Group shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Non-Executive Director Enrico Buratto bought AU$26k worth of shares at an average price of around AU$13.85. It seems that at least one insider is prepared to show the market there is potential within Monadelphous Group.
The good news, alongside the insider buying, for Monadelphous Group bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have AU$55m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 4.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add Monadelphous Group To Your Watchlist?
One positive for Monadelphous Group is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We don't want to rain on the parade too much, but we did also find 1 warning sign for Monadelphous Group that you need to be mindful of.
The good news is that Monadelphous 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.
