Does Madison Square Garden Sports (NYSE:MSGS) Deserve A Spot On Your Watchlist?

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Madison Square Garden Sports (NYSE:MSGS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Madison Square Garden Sports with the means to add long-term value to shareholders.

Check out our latest analysis for Madison Square Garden Sports

Madison Square Garden Sports' Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Madison Square Garden Sports' EPS has grown 21% each year, compound, over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Madison Square Garden Sports shareholders can take confidence from the fact that EBIT margins are up from 9.6% to 14%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Madison Square Garden Sports' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Madison Square Garden Sports Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Madison Square Garden Sports followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. With a whopping US$62m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.

Does Madison Square Garden Sports Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Madison Square Garden Sports' strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that Madison Square Garden Sports is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Although Madison Square Garden Sports certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.