Here's Why We Think EL. D. Mouzakis (ATH:MOYZK) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like EL. D. Mouzakis (ATH:MOYZK). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 EL. D. Mouzakis

How Quickly Is EL. D. Mouzakis Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that EL. D. Mouzakis has grown EPS by 39% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). EL. D. Mouzakis maintained stable EBIT margins over the last year, all while growing revenue 19% to €5.0m. That's progress.

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

Since EL. D. Mouzakis is no giant, with a market capitalization of €21m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are EL. D. Mouzakis Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that EL. D. Mouzakis insiders own a meaningful share of the business. Indeed, with a collective holding of 77%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have €16m invested in the business, using the current share price. That's nothing to sneeze at!

Should You Add EL. D. Mouzakis To Your Watchlist?

EL. D. Mouzakis's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering EL. D. Mouzakis for a spot on your watchlist. However, before you get too excited we've discovered 4 warning signs for EL. D. Mouzakis (1 shouldn't be ignored!) that you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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.