Here's Why We Think Mediacle Group (NGM:MEGR) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Mediacle Group (NGM:MEGR). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Mediacle Group's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Mediacle Group to have grown EPS from kr0.24 to kr0.85 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. Mediacle Group's EBIT margins have actually improved by 6.2 percentage points in the last year, to reach 24%, but, on the flip side, revenue was down 9.0%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

See our latest analysis for Mediacle Group

Since Mediacle Group is no giant, with a market capitalisation of kr130m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Mediacle Group Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Mediacle Group insiders own a significant number of shares certainly is appealing. In fact, they own 84% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Mediacle Group being valued at kr130m, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to kr109m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is Mediacle Group Worth Keeping An Eye On?

Mediacle Group's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Mediacle Group is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Before you take the next step you should know about the 2 warning signs for Mediacle Group that we have uncovered.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in SE with promising growth potential and insider confidence.

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.