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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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Menora Mivtachim Holdings (TLV:MMHD). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. As a tree reaches steadily for the sky, Menora Mivtachim Holdings's EPS has grown 24% 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.

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. 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 Menora Mivtachim Holdings did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
TASE:MMHD Earnings and Revenue History May 3rd 2022

While profitability drives the upside, prudent investors always check the balance sheet, too.

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. So it is good to see that Menora Mivtachim Holdings insiders have a significant amount of capital invested in the stock. Indeed, they hold ₪137m 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.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Menora Mivtachim Holdings with market caps between ₪3.4b and ₪11b is about ₪3.6m.

Menora Mivtachim Holdings offered total compensation worth ₪3.3m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Menora Mivtachim Holdings Worth Keeping An Eye On?

You can't deny that Menora Mivtachim Holdings has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Each to their own, but I think all this makes Menora Mivtachim Holdings look rather interesting indeed. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Menora Mivtachim Holdings 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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