Here's Why We Think Macquarie Group (ASX:MQG) Might Deserve Your Attention Today

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Macquarie Group (ASX:MQG), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Macquarie Group

Macquarie 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 you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Macquarie Group has managed to grow EPS by 20% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. It's noted that Macquarie Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Macquarie Group maintained stable EBIT margins over the last year, all while growing revenue 10.0% to AU$19b. That's progress.

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 Macquarie 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 Macquarie 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. 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.

Despite AU$51k worth of sales, Macquarie Group insiders have overwhelmingly been buying the stock, spending AU$533k on purchases in the last twelve months. This overall confidence in the company at current the valuation signals their optimism. It is also worth noting that it was Independent Non Executive Director Rebecca McGrath who made the biggest single purchase, worth AU$129k, paying AU$180 per share.

Along with the insider buying, another encouraging sign for Macquarie Group is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth AU$378m. While that is a lot of skin in the game, we note this holding only totals to 0.6% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Does Macquarie Group Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Macquarie Group's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for Macquarie Group you should know about.

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

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.