We Ran A Stock Scan For Earnings Growth And Metals Exploration (LON:MTL) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Metals Exploration (LON:MTL), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Metals Exploration

Metals Exploration's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that Metals Exploration grew its EPS from US$0.022 to US$0.081, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, Metals Exploration's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Metals Exploration isn't a huge company, given its market capitalisation of UK£92m. That makes it extra important to check on its balance sheet strength.

Are Metals Exploration Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Metals Exploration insiders own a significant number of shares certainly is appealing. Owning 44% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about US$41m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Metals Exploration Worth Keeping An Eye On?

Metals Exploration's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Metals Exploration very closely. We don't want to rain on the parade too much, but we did also find 3 warning signs for Metals Exploration (2 are a bit concerning!) that you need to be mindful of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in GB with promising growth potential and insider confidence.

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.