I Ran A Stock Scan For Earnings Growth And MPL Verbum (WSE:VER) Passed With Ease

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like MPL Verbum (WSE:VER). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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

MPL Verbum's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud MPL Verbum's stratospheric annual EPS growth of 45%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. MPL Verbum shareholders can take confidence from the fact that EBIT margins are up from 3.3% to 5.4%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since MPL Verbum is no giant, with a market capitalization of zł8.7m, so you should definitely check its cash and debt before getting too excited about its prospects.

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 we're pleased to report that MPL Verbum insiders own a meaningful share of the business. 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 zł8.7m. So despite a large proportional holding, insiders only have zł6.8m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Does MPL Verbum Deserve A Spot On Your Watchlist?

MPL Verbum's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind MPL Verbum is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 2 warning signs for MPL Verbum (1 is concerning!) that you should be aware of before investing here.

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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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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