We Ran A Stock Scan For Earnings Growth And Mader Group (ASX:MAD) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Mader Group (ASX:MAD). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Mader Group

Mader Group's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Mader Group has grown EPS by 27% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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 Mader Group achieved similar EBIT margins to last year, revenue grew by a solid 43% to AU$497m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Mader Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Mader 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.

We haven't seen any insiders selling Mader Group shares, in the last year. With that in mind, it's heartening that Justin Nuich, the CEO & Executive Director of the company, paid AU$20k for shares at around AU$3.96 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Mader Group.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Mader Group will reveal that insiders own a significant piece of the pie. To be exact, company insiders hold 77% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. This insider holding amounts to That level of investment from insiders is nothing to sneeze at.

Should You Add Mader Group To Your Watchlist?

For growth investors, Mader Group's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. You still need to take note of risks, for example - Mader Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Mader 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.

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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.