Stock Analysis

With EPS Growth And More, Macquarie Group (ASX:MQG) Is Interesting

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ASX:MQG
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Macquarie Group (ASX:MQG). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Macquarie Group

How Quickly Is Macquarie Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Macquarie Group has grown EPS by 14% per year. That's a good rate of growth, if it can be sustained.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Macquarie Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Macquarie Group's EBIT margins were flat over the last year, revenue grew by a solid 31% to AU$15b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
ASX:MQG Earnings and Revenue History October 30th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Macquarie Group's forecast profits?

Are Macquarie Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.

The good news is that Macquarie Group insiders spent a whopping AU$7.1m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. Zooming in, we can see that the biggest insider purchase was by CEO, MD & Executive Voting Director Shemara Wikramanayake for AU$7.1m worth of shares, at about AU$151 per share.

The good news, alongside the insider buying, for Macquarie Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at AU$711m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Macquarie Group To Your Watchlist?

One positive for Macquarie Group is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 1 warning sign for Macquarie Group that you should be aware of before investing here.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Macquarie Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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