With EPS Growth And More, Macfarlane Group (LON:MACF) Is Interesting

By
Simply Wall St
Published
June 13, 2021
LSE:MACF
Source: Shutterstock

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Macfarlane Group (LON:MACF). 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. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Macfarlane Group

How Quickly Is Macfarlane Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Macfarlane Group managed to grow EPS by 7.3% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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 we note Macfarlane Group's EBIT margins were flat over the last year, revenue grew by a solid 2.1% to UK£230m. That's progress.

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.

earnings-and-revenue-history
LSE:MACF Earnings and Revenue History June 14th 2021

Since Macfarlane Group is no giant, with a market capitalization of UK£189m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Macfarlane Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Macfarlane Group shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Ivor Gray, the Group Finance Director of the company, paid UK£10.0k for shares at around UK£0.85 each.

Should You Add Macfarlane Group To Your Watchlist?

One positive for Macfarlane Group is that it is growing EPS. That's nice to see. While some companies are struggling to grow EPS, Macfarlane Group seems free from that morose affliction. The cherry on top is that we have an insider buying shares. That encourages me further to keep an eye on this stock. Still, you should learn about the 1 warning sign we've spotted with Macfarlane Group .

As a growth investor I do like to see insider buying. But Macfarlane Group 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. 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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