Here's Why We Think Micro-Mechanics (Holdings) (SGX:5DD) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Micro-Mechanics (Holdings) (SGX:5DD), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Micro-Mechanics (Holdings)

How Quickly Is Micro-Mechanics (Holdings) Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Micro-Mechanics (Holdings) grew its EPS by 15% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Micro-Mechanics (Holdings) maintained stable EBIT margins over the last year, all while growing revenue 12% to S$82m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Micro-Mechanics (Holdings) is no giant, with a market capitalisation of S$381m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Micro-Mechanics (Holdings) Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in Micro-Mechanics (Holdings) will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 39% of the company to their names, insiders are profoundly invested in the business. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. In terms of absolute value, insiders have S$148m invested in the business, at the current share price. So there's plenty there to keep them focused!

Does Micro-Mechanics (Holdings) Deserve A Spot On Your Watchlist?

As previously touched on, Micro-Mechanics (Holdings) is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 1 warning sign for Micro-Mechanics (Holdings) that you should be aware of.

The beauty of investing is that you can invest in almost 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. 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.