Here's Why We Think Mattioli Woods (LON:MTW) Is Well Worth Watching

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 completely lacks a track record of revenue and profit. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Mattioli Woods (LON:MTW). 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 Mattioli Woods

How Fast Is Mattioli Woods Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Mattioli Woods grew its EPS by 16% per year. That's a pretty good rate, if the company can sustain it.

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. While revenue is looking a bit flat, the good news is EBIT margins improved by 6.7 percentage points to 24%, in the last twelve months. That's something to smile about.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 Mattioli Woods?

Are Mattioli Woods Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

One positive for Mattioli Woods, is that company insiders paid UK£4.5k for shares in the last year. While this isn't much, we also note an absence of sales.

On top of the insider buying, it's good to see that Mattioli Woods insiders have a valuable investment in the business. Indeed, they hold UK£35m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 17% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Mattioli Woods To Your Watchlist?

As I already mentioned, Mattioli Woods is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. You should always think about risks though. Case in point, we've spotted 1 warning sign for Mattioli Woods you should be aware of.

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