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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Mitie Group (LON:MTO), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Mitie Group
Mitie Group’s Improving Profits
In the last three years Mitie 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. To the delight of shareholders, Mitie Group’s EPS soared from UK£0.068 to UK£0.10, over the last year. That’s a commendable gain of 48%.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Mitie Group achieved similar EBIT margins to last year, revenue grew by a solid 13% to UK£4.4b. That’s a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
While we live in the present moment, there’s little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Mitie Group?
Are Mitie Group Insiders Aligned With All Shareholders?
It’s said that there’s no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.
Mitie Group insiders both bought and sold shares over the last twelve months, but they did end up spending UK£38k more on stock than they received from selling it. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management.
On top of the insider buying, it’s good to see that Mitie Group insiders have a valuable investment in the business. As a matter of fact, their holding is valued at UK£19m. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that’s only about 1.3% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Should You Add Mitie Group To Your Watchlist?
You can’t deny that Mitie Group has grown its earnings per share at a very impressive rate. That’s attractive. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. Don’t forget that there may still be risks. For instance, we’ve identified 1 warning sign for Mitie Group that you should be aware of.
Keen growth investors love to see insider activity. Thankfully, Mitie Group isn’t the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by high insider ownership.
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.