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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Mensch und Maschine Software (FRA:MUM), which has not only revenues, but also profits. 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is Mensch und Maschine Software Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Who among us would not applaud Mensch und Maschine Software’s stratospheric annual EPS growth of 44%, compound, over the last three years? While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a glint in the eye of my lover.
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. Mensch und Maschine Software maintained stable EBIT margins over the last year, all while growing revenue 15% to €185m. That’s a real positive.
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.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Mensch und Maschine Software?
Are Mensch und Maschine Software Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Mensch und Maschine Software insiders own a significant number of shares certainly appeals to me. Actually, with 46% of the company to their names, insiders are profoundly invested in the business. 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. At the current share price, that insider holding is worth a whopping €255m. Now that’s what I call some serious skin in the game!
Does Mensch und Maschine Software Deserve A Spot On Your Watchlist?
Mensch und Maschine Software’s earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Mensch und Maschine Software is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of Mensch und Maschine Software. You might benefit from giving it a glance today.
Although Mensch und Maschine Software certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.