With EPS Growth And More, Mineral Commodities (ASX:MRC) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Mineral Commodities (ASX:MRC). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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 Mineral Commodities

How Fast Is Mineral Commodities Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Mineral Commodities managed to grow EPS by 9.0% per year, over three years. 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. Not all of Mineral Commodities's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Mineral Commodities shareholders can take confidence from the fact that EBIT margins are up from 19% to 23%, 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.

Mineral Commodities isn't a huge company, given its market capitalization of AU$182m. That makes it extra important to check on its balance sheet strength.

Are Mineral Commodities Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Mineral Commodities top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Independent Non-Executive Chairman, David Baker, paid US$82k to buy shares at an average price of US$0.33.

On top of the insider buying, it's good to see that Mineral Commodities insiders have a valuable investment in the business. To be specific, they have US$21m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 11% of the company; visible skin in the game.

Should You Add Mineral Commodities To Your Watchlist?

One important encouraging feature of Mineral Commodities is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. However, before you get too excited we've discovered 2 warning signs for Mineral Commodities (1 is a bit unpleasant!) that you should be aware of.

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