Does MSCI (NYSE:MSCI) Deserve A Spot On Your Watchlist?

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in MSCI (NYSE:MSCI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MSCI with the means to add long-term value to shareholders.

Check out our latest analysis for MSCI

How Quickly Is MSCI Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, MSCI has grown EPS by 21% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. MSCI maintained stable EBIT margins over the last year, all while growing revenue 15% to US$2.7b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for MSCI's future EPS 100% free.

Are MSCI Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold US$5.3m worth of shares. But that's far less than the US$9.5m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about MSCI'sfuture. It is also worth noting that it was Chairman & CEO Henry Fernandez who made the biggest single purchase, worth US$6.1m, paying US$470 per share.

Along with the insider buying, another encouraging sign for MSCI is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth US$1.5b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Is MSCI Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into MSCI's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. However, before you get too excited we've discovered 2 warning signs for MSCI that you should be aware of.

The good news is that MSCI is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US 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.