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Is Now The Time To Put Metals X (ASX:MLX) On Your Watchlist?

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.

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 Metals X (ASX:MLX). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Metals X

How Fast Is Metals X Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Metals X's EPS went from AU$0.025 to AU$0.19 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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 music to the ears of Metals X shareholders is that EBIT margins have grown from 15% to 55% 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. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

Metals X isn't a huge company, given its market capitalisation of AU$263m. That makes it extra important to check on its balance sheet strength.

Are Metals X 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Metals X shares, in the last year. Add in the fact that Brett Smith, the Executive Director of the company, paid AU$19k for shares at around AU$0.47 each. It seems that at least one insider is prepared to show the market there is potential within Metals X.

Should You Add Metals X To Your Watchlist?

Metals X's earnings per share have been soaring, with growth rates sky high. Growth-minded people will be intrigued by the incredible movement in EPS growth. And may very well signal a significant inflection point for the business. If this these factors intrigue you, then an addition of Metals X to your watchlist won't go amiss. You still need to take note of risks, for example - Metals X has 1 warning sign we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Metals X 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.

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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