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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Microequities Asset Management Group (ASX:MAM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Microequities Asset Management Group's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Microequities Asset Management Group has grown EPS by 39% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
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. I note that Microequities Asset Management Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that Microequities Asset Management Group is growing revenues, and EBIT margins improved by 22.2 percentage points to 84%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Microequities Asset Management Group isn't a huge company, given its market capitalization of AU$107m. That makes it extra important to check on its balance sheet strength.
Are Microequities Asset Management Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
Not only did Microequities Asset Management Group insiders refrain from selling stock during the year, but they also spent AU$127k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Non-Executive Chairman, Leslie Szekely, who made the biggest single acquisition, paying AU$105k for shares at about AU$0.46 each.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Microequities Asset Management Group insiders own more than a third of the company. In fact, they own 75% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about AU$80m riding on the stock, at current prices. That's nothing to sneeze at!
Does Microequities Asset Management Group Deserve A Spot On Your Watchlist?
Microequities Asset Management Group's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Microequities Asset Management Group belongs on the top of your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Microequities Asset Management Group that you should be aware of.
The good news is that Microequities Asset Management Group 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.
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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