We Ran A Stock Scan For Earnings Growth And Medpace Holdings (NASDAQ:MEDP) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Medpace Holdings (NASDAQ:MEDP). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Medpace Holdings

How Fast Is Medpace Holdings 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. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Medpace Holdings has achieved impressive annual EPS growth of 41%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. While we note Medpace Holdings achieved similar EBIT margins to last year, revenue grew by a solid 28% to US$1.5b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

While there was some insider selling, that pales in comparison to the US$25m that the Chairman & CEO, August Troendle spent acquiring shares. The average price of which was US$160 per share. Insider buying like this is a rare occurrence and should stoke the interest of the market and shareholders alike.

Along with the insider buying, another encouraging sign for Medpace Holdings is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$1.3b. That equates to 24% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Medpace Holdings' CEO, August Troendle, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Medpace Holdings with market caps between US$4.0b and US$12b is about US$8.4m.

The Medpace Holdings CEO received US$5.9m in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Medpace Holdings Deserve A Spot On Your Watchlist?

Medpace Holdings' earnings per share growth have been climbing higher at an appreciable rate. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Medpace Holdings belongs near the top of your watchlist. Now, you could try to make up your mind on Medpace Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Keen growth investors love to see insider buying. Thankfully, Medpace Holdings isn't the only one. You can see a a free list of them here.

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.