Here's Why I Think MPL Verbum (WSE:VER) Might Deserve Your Attention Today

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like MPL Verbum (WSE:VER), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 MPL Verbum

How Fast Is MPL Verbum Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, MPL Verbum's EPS has grown 32% 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. While we note MPL Verbum's EBIT margins were flat over the last year, revenue grew by a solid 27% to zł20m. That's progress.

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.

MPL Verbum isn't a huge company, given its market capitalization of zł7.6m. That makes it extra important to check on its balance sheet strength.

Are MPL Verbum Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that MPL Verbum insiders own a significant number of shares certainly appeals to me. In fact, they own 78% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, MPL Verbum is a very small company, with a market cap of only zł7.6m. So despite a large proportional holding, insiders only have zł5.9m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is MPL Verbum Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about MPL Verbum's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. It is worth noting though that we have found 2 warning signs for MPL Verbum (1 makes us a bit uncomfortable!) that you need to take into consideration.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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. 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.
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