Is Now The Time To Put Mytilineos (ATH:MYTIL) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Mytilineos (ATH:MYTIL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Mytilineos

Mytilineos' Improving Profits

Over the last three years, Mytilineos has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Mytilineos' EPS skyrocketed from €3.41 to €4.51, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 32%.

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. Unfortunately, Mytilineos' revenue dropped 13% last year, but the silver lining is that EBIT margins improved from 12% to 16%. That falls short of ideal.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Mytilineos.

Are Mytilineos Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The first bit of good news is that no Mytilineos insiders reported share sales in the last twelve months. But the really good news is that Independent Non-Executive Director Alexios Pilavios of Andreas spent €307k buying stock, at an average price of around €30.72. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

The good news, alongside the insider buying, for Mytilineos bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have €30m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Mytilineos Deserve A Spot On Your Watchlist?

You can't deny that Mytilineos has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Mytilineos (at least 2 which can't be ignored) , and understanding these should be part of your investment process.

The good news is that Mytilineos is not the only growth stock with insider buying. Here's a list of growth-focused companies in GR with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.