Do Manning & Napier's (NYSE:MN) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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.

In contrast to all that, I prefer to spend time on companies like Manning & Napier (NYSE:MN), 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. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Manning & Napier

Manning & Napier's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Manning & Napier has managed to grow EPS by 36% per year 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.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Manning & Napier's EBIT margins have actually improved by 2.9 percentage points in the last year, to reach 13%, but, on the flip side, revenue was down 6.6%. That's not ideal.

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 Manning & Napier is no giant, with a market capitalization of US$141m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Manning & Napier Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's good to see Manning & Napier insiders walking the walk, by spending US$269k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by Director of Investments Ebrahim Busheri for US$111k worth of shares, at about US$3.89 per share.

Along with the insider buying, another encouraging sign for Manning & Napier is that insiders, as a group, have a considerable shareholding. To be specific, they have US$21m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 15% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Manning & Napier To Your Watchlist?

You can't deny that Manning & Napier has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Manning & Napier (at least 1 which shouldn't be ignored) , and understanding these should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Manning & Napier, you'll probably love this free list of growing companies that insiders are buying.

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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