Here's Why We Think MakoLab Spólka Akcyjna (WSE:MLB) Is Well Worth Watching

By
Simply Wall St
Published
May 26, 2021
WSE:MLB
Source: Shutterstock

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 MakoLab Spólka Akcyjna (WSE:MLB). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

Check out our latest analysis for MakoLab Spólka Akcyjna

MakoLab Spólka Akcyjna's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that MakoLab Spólka Akcyjna has grown EPS by 47% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. While MakoLab Spólka Akcyjna did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
WSE:MLB Earnings and Revenue History May 27th 2021

Since MakoLab Spólka Akcyjna is no giant, with a market capitalization of zł44m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are MakoLab Spólka Akcyjna 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 MakoLab Spólka Akcyjna insiders own a significant number of shares certainly appeals to me. In fact, they own 74% 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. Valued at only zł44m MakoLab Spólka Akcyjna is really small for a listed company. That means insiders only have zł32m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does MakoLab Spólka Akcyjna Deserve A Spot On Your Watchlist?

MakoLab Spólka Akcyjna's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering MakoLab Spólka Akcyjna for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for MakoLab Spólka Akcyjna that you should be aware of.

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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