We Ran A Stock Scan For Earnings Growth And Martinrea International (TSE:MRE) Passed With Ease
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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Martinrea International (TSE:MRE). 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 Martinrea International
Martinrea International's Improving Profits
In the last three years Martinrea International's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Martinrea International's EPS shot from CA$0.96 to CA$2.51, over the last year. It's not often a company can achieve year-on-year growth of 163%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of Martinrea International shareholders is that EBIT margins have grown from 3.5% to 5.9% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
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.
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 Martinrea International's future profits.
Are Martinrea International 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. 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.
We do note that, in the last year, insiders sold CA$17k worth of shares. But that's far less than the CA$1.3m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Martinrea International'sfuture. It is also worth noting that it was President Frank D'Eramo who made the biggest single purchase, worth CA$207k, paying CA$13.77 per share.
The good news, alongside the insider buying, for Martinrea International bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold CA$19m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is Martinrea International Worth Keeping An Eye On?
Martinrea International's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Martinrea International belongs near the top of your watchlist. Still, you should learn about the 1 warning sign we've spotted with Martinrea International.
Keen growth investors love to see insider buying. Thankfully, Martinrea International 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.
