For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it currently lacks a track record of revenue and earnings. Unfortunately, these high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson. A loss-making company has not yet proven itself with profits, and eventually the inflow of external capital may dry up.
Contrary to all this, many investors prefer to focus on companies like Microequities Asset Management Group (ASX: MAM), which not only generates revenue, but also profits. While that doesn’t necessarily mean it’s undervalued, the company’s profitability is enough to warrant some appreciation, especially if it’s growing.
Microequities Asset Management Group Earnings Improved
In business, profits are a key measure of success; and stock prices tend to reflect earnings per share (EPS) performance. This is why EPS growth is viewed so favorably. Praise must be given for seeing that Microequities Asset Management Group increased its EPS from AU$0.047 to AU$0.17, in a single year. When you see profits growing this quickly, it often means good things for the business. Could this be a sign that the company has reached an inflection point?
One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. It should be noted that the income of Microequities Asset Management Group operations was lower than its turnover for the last twelve months, which could distort our analysis of its margins. The good news is that Microequities Asset Management Group is growing its revenues and EBIT margins have improved by 13.7 percentage points to 89% compared to last year. These are two great indicators to check for potential growth.
You can check the company’s revenue and profit growth trend in the table below. Click on the table to see the exact numbers.
Since Microequities Asset Management Group is not a giant, with a market cap of AU$93 million, you should definitely check your cash and debt before getting too excited about his prospects.
Are Microequities Asset Management group insiders aligned with all shareholders?
It is said that there is no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks might ignite the market. Indeed, insider buying often indicates that those closest to the company are confident that the stock price will perform well. However, small purchases don’t always reveal conviction, and insiders don’t always get it right.
First, there have been no insider reports selling shares of Microequities Asset Management Group in the past 12 months. But the important part is that independent non-executive director Alexander Abrahams spent A$368,000 buying shares, at an average price of A$0.86. It seems that at least one insider thinks the company is doing well – and they are backing that view with cash.
And insider buying isn’t the only sign of alignment between shareholders and the board, as Microequities Asset Management Group insiders own more than a third of the company. Indeed, they own 75% of the company, so they will share the same delights and challenges experienced by ordinary shareholders. This shows that they will be incentivized to plan for the long term – a shareholder benefit with a sit and hold strategy. To give you an idea, insider stakes in the company are valued at A$70 million at the current share price. It is not to be despised!
Should you add asset management group Microequities to your watchlist?
Earnings at Microequities Asset Management Group took off quite impressively. To sweeten the deal, insiders have significant skin in the game, with one acquiring even more. These factors seem to indicate the potential of the company and that it has reached an inflection point. We suggest Microequities Asset Management Group is at the top of your watch list. Before proceeding to the next step, you must know the 2 warning signs for Microequities Asset Management Group that we discovered.
The good news is that Microequities Asset Management Group isn’t the only growth stock to buy insiders. Here is a list of them… with insider purchases over the past three months!
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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