If EPS Growth Is Important To You, MACOM Technology Solutions Holdings (NASDAQ:MTSI) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 MACOM Technology Solutions Holdings (NASDAQ:MTSI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MACOM Technology Solutions Holdings with the means to add long-term value to shareholders.
See our latest analysis for MACOM Technology Solutions Holdings
MACOM Technology Solutions Holdings' Improving Profits
In the last three years MACOM Technology Solutions Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, MACOM Technology Solutions Holdings' EPS soared from US$2.90 to US$4.61, over the last year. That's a fantastic gain of 59%.
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. MACOM Technology Solutions Holdings shareholders can take confidence from the fact that EBIT margins are up from 17% to 21%, and revenue is growing. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
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 MACOM Technology Solutions Holdings' future profits.
Are MACOM Technology Solutions Holdings Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that MACOM Technology Solutions Holdings insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth US$1.1b. That equates to 24% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.
Is MACOM Technology Solutions Holdings Worth Keeping An Eye On?
For growth investors, MACOM Technology Solutions Holdings' raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. What about risks? Every company has them, and we've spotted 2 warning signs for MACOM Technology Solutions Holdings you should know about.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.
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