Here's Why We Think MaxiPARTS (ASX:MXI) Might Deserve Your Attention Today
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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 MaxiPARTS (ASX:MXI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MaxiPARTS with the means to add long-term value to shareholders.
Check out our latest analysis for MaxiPARTS
How Fast Is MaxiPARTS Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that MaxiPARTS' EPS has grown 21% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. EBIT margins for MaxiPARTS remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 32% to AU$202m. That's progress.
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 MaxiPARTS' future profits.
Are MaxiPARTS 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. 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.
We haven't seen any insiders selling MaxiPARTS shares, in the last year. So it's definitely nice that Independent Non-Executive Director Frank Micallef bought AU$50k worth of shares at an average price of around AU$2.39. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in MaxiPARTS.
On top of the insider buying, it's good to see that MaxiPARTS insiders have a valuable investment in the business. As a matter of fact, their holding is valued at AU$20m. This considerable investment should help drive long-term value in the business. Those holdings account for over 15% of the company; visible skin in the game.
Is MaxiPARTS Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into MaxiPARTS' strong EPS growth. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. Even so, be aware that MaxiPARTS is showing 1 warning sign in our investment analysis , you should know about...
Keen growth investors love to see insider buying. Thankfully, MaxiPARTS isn't the only one. You can see a 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.
