Here's Why We Think Medpace Holdings (NASDAQ:MEDP) 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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Medpace Holdings (NASDAQ:MEDP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Medpace Holdings with the means to add long-term value to shareholders.
View our latest analysis for Medpace Holdings
How Quickly Is Medpace Holdings Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Medpace Holdings has achieved impressive annual EPS growth of 40%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. While we note Medpace Holdings achieved similar EBIT margins to last year, revenue grew by a solid 29% to US$1.6b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Medpace Holdings.
Are Medpace Holdings Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We did see some selling in the last twelve months, but that's insignificant compared to the whopping US$25m that the Chairman & CEO, August Troendle spent acquiring shares. The average price of which was US$160 per share. Insider buying like this is a rare occurrence and should stoke the interest of the market and shareholders alike.
On top of the insider buying, it's good to see that Medpace Holdings insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$1.5b. 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.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Medpace Holdings' CEO, August Troendle, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$4.0b and US$12b, like Medpace Holdings, the median CEO pay is around US$8.2m.
The Medpace Holdings CEO received total compensation of just US$1.9m in the year to 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 compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Medpace Holdings Deserve A Spot On Your Watchlist?
Medpace Holdings' earnings per share have been soaring, with growth rates sky high. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Medpace Holdings deserves timely attention. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Medpace Holdings. You might benefit from giving it a glance today.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Medpace Holdings, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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