Should You Be Adding Macpower CNC Machines (NSE:MACPOWER) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Macpower CNC Machines (NSE:MACPOWER). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Macpower CNC Machines

How Fast Is Macpower CNC Machines 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. To the delight of shareholders, Macpower CNC Machines has achieved impressive annual EPS growth of 56%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Macpower CNC Machines shareholders is that EBIT margins have grown from 8.2% to 14% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Macpower CNC Machines isn't a huge company, given its market capitalisation of ₹13b. That makes it extra important to check on its balance sheet strength.

Are Macpower CNC Machines Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news for Macpower CNC Machines shareholders is that no insiders reported selling shares in the last year. Add in the fact that Rupesh Kumar Mehta, the Chairman & MD of the company, paid ₹1.8m for shares at around ₹290 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Macpower CNC Machines.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Macpower CNC Machines insiders own more than a third of the company. In fact, they own 40% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at ₹5.1b at the current share price. So there's plenty there to keep them focused!

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Nikesh Metha, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Macpower CNC Machines, with market caps between ₹8.4b and ₹33b, is around ₹15m.

The Macpower CNC Machines CEO received total compensation of only ₹2.4m in the year to March 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, 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 Macpower CNC Machines Worth Keeping An Eye On?

Macpower CNC Machines' earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Macpower CNC Machines belongs near the top of your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Macpower CNC Machines is trading on a high P/E or a low P/E, relative to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Macpower CNC Machines, you'll probably love this curated collection of companies in IN that have an attractive valuation alongside 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.