With EPS Growth And More, MGE Energy (NASDAQ:MGEE) Makes An Interesting Case
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in MGE Energy (NASDAQ:MGEE). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for MGE Energy
MGE Energy's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years MGE Energy grew its EPS by 6.2% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.
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. MGE Energy shareholders can take confidence from the fact that EBIT margins are up from 21% to 24%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of MGE Energy's forecast profits?
Are MGE Energy 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did MGE Energy insiders refrain from selling stock during the year, but they also spent US$135k buying it. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Director, James Berbee, who made the biggest single acquisition, paying US$80k for shares at about US$70.19 each.
It's reassuring that MGE Energy insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to MGE Energy, with market caps between US$2.0b and US$6.4b, is around US$6.6m.
The CEO of MGE Energy only received US$1.7m in total compensation for the year ending December 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Is MGE Energy Worth Keeping An Eye On?
One positive for MGE Energy is that it is growing EPS. That's nice to see. And there's more to MGE Energy, with the insider buying and modest CEO pay being a great look for those with an eye on the company. If these factors aren't enough to secure MGE Energy a spot on the watchlist, then it certainly warrants a closer look at the very least. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with MGE Energy , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of MGE Energy, you'll probably love this free list of growing companies that insiders are buying.
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.
