If You Like EPS Growth Then Check Out Minerva Insurance Company (CSE:MINE) Before It's Too Late

By
Simply Wall St
Published
August 25, 2021
CSE:MINE
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Minerva Insurance Company (CSE:MINE). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Minerva Insurance Company

Minerva Insurance Company's Improving Profits

Over the last three years, Minerva Insurance Company has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Minerva Insurance Company's EPS soared from €0.0013 to €0.0018, in just one year. That's a commendable gain of 37%.

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 Minerva Insurance Company'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 Minerva Insurance Company's EBIT margins were flat over the last year, revenue grew by a solid 13% to €15m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
CSE:MINE Earnings and Revenue History August 26th 2021

Minerva Insurance Company isn't a huge company, given its market capitalization of €2.0m. That makes it extra important to check on its balance sheet strength.

Are Minerva Insurance Company Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Minerva Insurance Company insiders own a meaningful share of the business. In fact, they own 50% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Valued at only €2.0m Minerva Insurance Company is really small for a listed company. That means insiders only have €992k worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is Minerva Insurance Company Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Minerva Insurance Company's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Minerva Insurance Company (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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