Should You Be Adding Morgan Advanced Materials (LON:MGAM) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Morgan Advanced Materials (LON:MGAM). 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 Morgan Advanced Materials

How Quickly Is Morgan Advanced Materials Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Over the last three years, Morgan Advanced Materials has grown EPS by 8.3% per year. That's a good rate of growth, if it can be sustained.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Morgan Advanced Materials is growing revenues, and EBIT margins improved by 2.3 percentage points to 13%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Morgan Advanced Materials?

Are Morgan Advanced Materials Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that Morgan Advanced Materials insiders netted UK£29k worth of shares over the last year. On the other hand, Independent Non-Executive Director Clement Woon paid UK£38k for shares, at a price of about UK£3.89 per share. Overall, that is something good to take away.

Is Morgan Advanced Materials Worth Keeping An Eye On?

As previously touched on, Morgan Advanced Materials is a growing business, which is encouraging. Not every business can grow its EPS, but Morgan Advanced Materials certainly can. The cherry on top is that we have an insider buying shares. A further encouragement to keep an eye on this stock. However, before you get too excited we've discovered 1 warning sign for Morgan Advanced Materials that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Morgan Advanced Materials isn't the only one. You can see a a free list of them here.

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.