Do MGP Ingredients' (NASDAQ:MGPI) Earnings Warrant Your Attention?
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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 MGP Ingredients (NASDAQ:MGPI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MGP Ingredients with the means to add long-term value to shareholders.
View our latest analysis for MGP Ingredients
How Quickly Is MGP Ingredients Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, MGP Ingredients has grown EPS by 30% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. The music to the ears of MGP Ingredients shareholders is that EBIT margins have grown from 16% to 19% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
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.
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 MGP Ingredients.
Are MGP Ingredients 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Even though there was some insider selling over the last year, that was outweighed by Director Donn Lux's huge outlay of US$2.0m, spent buying shares. The average price paid was about US$97.80. 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 MGP Ingredients insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$518m. That equates to 24% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Dave Colo is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to MGP Ingredients, with market caps between US$1.0b and US$3.2b, is around US$5.4m.
The MGP Ingredients CEO received US$3.4m in compensation for the year ending December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Does MGP Ingredients Deserve A Spot On Your Watchlist?
You can't deny that MGP Ingredients has grown its earnings per share at a very impressive rate. That's attractive. 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. If you think MGP Ingredients might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
The good news is that MGP Ingredients is not the only growth stock with insider buying. Here's a list of them... 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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