We Ran A Stock Scan For Earnings Growth And Mizrahi Tefahot Bank (TLV:MZTF) Passed With Ease

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Mizrahi Tefahot Bank (TLV:MZTF). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mizrahi Tefahot Bank with the means to add long-term value to shareholders.

Our analysis indicates that MZTF is potentially undervalued!

Mizrahi Tefahot Bank's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Mizrahi Tefahot Bank's EPS has grown 28% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Not all of Mizrahi Tefahot Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Mizrahi Tefahot Bank achieved similar EBIT margins to last year, revenue grew by a solid 27% to ₪12b. 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.

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 Mizrahi Tefahot Bank.

Are Mizrahi Tefahot Bank Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Mizrahi Tefahot Bank with market caps between ₪14b and ₪42b is about ₪5.5m.

The Mizrahi Tefahot Bank CEO received ₪4.1m in compensation for the year ending December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Mizrahi Tefahot Bank To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Mizrahi Tefahot Bank's strong EPS growth. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. You still need to take note of risks, for example - Mizrahi Tefahot Bank has 1 warning sign we think you should be aware of.

Although Mizrahi Tefahot Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.