If EPS Growth Is Important To You, Metals X (ASX:MLX) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Metals X (ASX:MLX). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Metals X

How Fast Is Metals X Growing Its Earnings Per Share?

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. It is awe-striking that Metals X's EPS went from AU$0.025 to AU$0.19 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Metals X shareholders can take confidence from the fact that EBIT margins are up from 15% to 55%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Metals X is no giant, with a market capitalisation of AU$281m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Metals X Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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 Metals X shares, in the last year. Add in the fact that Brett Smith, the Executive Director of the company, paid AU$19k for shares at around AU$0.47 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Metals X.

Is Metals X Worth Keeping An Eye On?

Metals X's earnings per share have been soaring, with growth rates sky high. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If this these factors intrigue you, then an addition of Metals X to your watchlist won't go amiss. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Metals X , and understanding this should be part of your investment process.

The good news is that Metals X is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.