Here's Why We Think Medpace Holdings (NASDAQ:MEDP) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Medpace Holdings (NASDAQ:MEDP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Medpace Holdings with the means to add long-term value to shareholders.

View our latest analysis for Medpace Holdings

How Fast Is Medpace Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Medpace Holdings has grown EPS by 40% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Medpace Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 29% to US$1.6b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Medpace Holdings.

Are Medpace Holdings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Even though there was some insider selling over the last year, that was outweighed by Chairman & CEO August Troendle's huge outlay of US$25m, spent buying shares. We should note the average purchase price was around US$160. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

On top of the insider buying, it's good to see that Medpace Holdings insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$1.7b. That equates to 23% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, August Troendle is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Medpace Holdings, with market caps between US$4.0b and US$12b, is around US$8.1m.

The Medpace Holdings CEO received total compensation of just US$1.9m in the year to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Medpace Holdings Deserve A Spot On Your Watchlist?

Medpace Holdings' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Medpace Holdings deserves timely attention. If you think Medpace Holdings might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

The good news is that Medpace Holdings is not the only growth stock with insider buying. Here's a list of them... 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.