Here's Why We Think Mainfreight (NZSE:MFT) Is Well Worth Watching

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

In contrast to all that, many investors prefer to focus on companies like Mainfreight (NZSE:MFT), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out the opportunities and risks within the XX Logistics industry.

How Quickly Is Mainfreight Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Mainfreight's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 46%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. While we note Mainfreight achieved similar EBIT margins to last year, revenue grew by a solid 41% to NZ$5.9b. That's a real positive.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Mainfreight?

Are Mainfreight 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.

Although we did see some insider selling (worth NZ$390k) this was overshadowed by a mountain of buying, totalling NZ$8.6m in just one year. This adds to the interest in Mainfreight because it suggests that those who understand the company best, are optimistic. We also note that it was the Founding Owner & Executive Chairman, Bruce Plested, who made the biggest single acquisition, paying NZ$3.5m for shares at about NZ$69.49 each.

On top of the insider buying, it's good to see that Mainfreight insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth NZ$1.3b. That equates to 18% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Is Mainfreight Worth Keeping An Eye On?

Mainfreight's earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Mainfreight belongs near the top of your watchlist. Of course, just because Mainfreight is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Mainfreight, you'll probably love this free list of growing companies that insiders are buying.

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.