If EPS Growth Is Important To You, Mullen Group (TSE:MTL) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

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 Mullen Group (TSE:MTL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Our analysis indicates that MTL is potentially undervalued!

Mullen Group's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Mullen Group has managed to grow EPS by 34% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Mullen Group shareholders can take confidence from the fact that EBIT margins are up from 3.9% to 8.6%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Mullen Group's future profits.

Are Mullen Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We note that Mullen Group insiders spent CA$221k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. Zooming in, we can see that the biggest insider purchase was by Independent Director Richard Whitley for CA$49k worth of shares, at about CA$12.34 per share.

The good news, alongside the insider buying, for Mullen Group bulls is that insiders (collectively) have a meaningful investment in the stock. Holding CA$75m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Murray Mullen, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Mullen Group, with market caps between CA$548m and CA$2.2b, is around CA$2.1m.

The Mullen Group CEO received total compensation of just CA$625k in the year to December 2021. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Mullen Group To Your Watchlist?

For growth investors, Mullen Group's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. You still need to take note of risks, for example - Mullen Group has 2 warning signs we think you should be aware of.

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