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If EPS Growth Is Important To You, MAS Financial Services (NSE:MASFIN) Presents An Opportunity
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like MAS Financial Services (NSE:MASFIN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MAS Financial Services with the means to add long-term value to shareholders.
Check out our latest analysis for MAS Financial Services
How Fast Is MAS Financial Services Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. MAS Financial Services' EPS shot up from ₹27.94 to ₹34.94; a result that's bound to keep shareholders happy. That's a fantastic gain of 25%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that MAS Financial Services' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for MAS Financial Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 38% to ₹4.4b. That's encouraging news for the company!
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.
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 MAS Financial Services' balance sheet strength, before getting too excited.
Are MAS Financial Services Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's good to see MAS Financial Services insiders walking the walk, by spending ₹23m on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. Zooming in, we can see that the biggest insider purchase was by Founder Kamlesh Gandhi for ₹6.7m worth of shares, at about ₹534 per share.
These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for MAS Financial Services will reveal that insiders own a significant piece of the pie. Actually, with 42% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. at the current share price. This is an incredible endorsement from them.
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, Darshana Pandya, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to MAS Financial Services, with market caps between ₹16b and ₹66b, is around ₹26m.
The CEO of MAS Financial Services was paid just ₹4.4m in total compensation for the year ending March 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add MAS Financial Services To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into MAS Financial Services' strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with MAS Financial Services (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
Keen growth investors love to see insider buying. Thankfully, MAS Financial Services isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Valuation is complex, but we're helping make it simple.
Find out whether MAS Financial Services 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.View the Free Analysis
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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.
MAS Financial Services
MAS Financial Services Limited, a non-banking finance company, provides retail financing services in India.
Proven track record with imperfect balance sheet.