Does M.P. Evans Group (LON:MPE) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 M.P. Evans Group (LON:MPE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide M.P. Evans Group with the means to add long-term value to shareholders.
See our latest analysis for M.P. Evans Group
M.P. Evans Group's Improving Profits
In the last three years M.P. Evans Group'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. In impressive fashion, M.P. Evans Group's EPS grew from US$0.83 to US$1.90, over the previous 12 months. It's not often a company can achieve year-on-year growth of 129%. That could be a sign that the business has reached a true inflection point.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that M.P. Evans Group is growing revenues, and EBIT margins improved by 8.9 percentage points to 39%, over the last year. Both of which are great metrics to check off for potential growth.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for M.P. Evans Group's future EPS 100% free.
Are M.P. Evans Group 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The good news for M.P. Evans Group shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Non-Executive Director Michael Sherwin bought US$20k worth of shares at an average price of around US$8.85. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.
On top of the insider buying, it's good to see that M.P. Evans Group insiders have a valuable investment in the business. With a whopping US$41m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 8.7% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.
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 on our analysis the CEO, Matthew Coulson, is paid less than the median for similar sized companies. For companies with market capitalisations between US$200m and US$800m, like M.P. Evans Group, the median CEO pay is around US$1.1m.
M.P. Evans Group's CEO took home a total compensation package worth US$781k in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. It can also be a sign of good governance, more generally.
Should You Add M.P. Evans Group To Your Watchlist?
M.P. Evans Group's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest M.P. Evans Group belongs near the top of your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with M.P. Evans Group (at least 1 which is potentially serious) , and understanding these should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of M.P. Evans Group, 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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