Stock Analysis

Here's Why I Think Menora Mivtachim Holdings (TLV:MMHD) Might Deserve Your Attention Today

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TASE:MMHD
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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Menora Mivtachim Holdings (TLV:MMHD). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Menora Mivtachim Holdings

How Quickly Is Menora Mivtachim Holdings Increasing Earnings Per Share?

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). It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Menora Mivtachim Holdings's EPS has grown 28% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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). I note that Menora Mivtachim Holdings's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Menora Mivtachim Holdings's EBIT margins were flat over the last year, revenue grew by a solid 71% to ₪14b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
TASE:MMHD Earnings and Revenue History February 2nd 2022

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Menora Mivtachim Holdings's balance sheet strength, before getting too excited.

Are Menora Mivtachim Holdings Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Menora Mivtachim Holdings shares worth a considerable sum. Indeed, they hold ₪134m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Menora Mivtachim Holdings To Your Watchlist?

For growth investors like me, Menora Mivtachim Holdings's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It is worth noting though that we have found 1 warning sign for Menora Mivtachim Holdings that you need to take into consideration.

Although Menora Mivtachim Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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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Find out whether Menora Mivtachim Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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