Here's Why We Think M.T.I Wireless Edge (LON:MWE) Is Well Worth Watching
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like M.T.I Wireless Edge (LON:MWE), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for M.T.I Wireless Edge
How Fast Is M.T.I Wireless Edge Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, M.T.I Wireless Edge has grown EPS by 14% per year. That's a good rate of growth, if it can be sustained.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). M.T.I Wireless Edge maintained stable EBIT margins over the last year, all while growing revenue 5.6% to US$43m. That's progress.
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.
M.T.I Wireless Edge isn't a huge company, given its market capitalization of UK£61m. That makes it extra important to check on its balance sheet strength.
Are M.T.I Wireless Edge Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, 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 M.T.I Wireless Edge insiders have a significant amount of capital invested in the stock. Indeed, they hold US$11m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 18% of the company, demonstrating a degree of high-level alignment with shareholders.
Does M.T.I Wireless Edge Deserve A Spot On Your Watchlist?
One important encouraging feature of M.T.I Wireless Edge is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Even so, be aware that M.T.I Wireless Edge is showing 3 warning signs in our investment analysis , you should know about...
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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.
