Does Marten Transport (NASDAQ:MRTN) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
April 21, 2022
NasdaqGS:MRTN
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Marten Transport (NASDAQ:MRTN). 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.

See our latest analysis for Marten Transport

Marten Transport's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Marten Transport has managed to grow EPS by 19% 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.

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. While we note Marten Transport's EBIT margins were flat over the last year, revenue grew by a solid 18% to US$1.0b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NasdaqGS:MRTN Earnings and Revenue History April 21st 2022

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Marten Transport's forecast profits?

Are Marten Transport Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The first bit of good news is that no Marten Transport insiders reported share sales in the last twelve months. Even better, though, is that the Independent Director, Jerry Bauer, bought a whopping US$226k worth of shares, paying about US$15.07 per share, on average. Big buys like that give me a sense of opportunity; actions speak louder than words.

Along with the insider buying, another encouraging sign for Marten Transport is that insiders, as a group, have a considerable shareholding. Notably, they have an enormous stake in the company, worth US$408m. That equates to 28% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

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, Tim Kohl is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between US$1.0b and US$3.2b, like Marten Transport, the median CEO pay is around US$4.5m.

The CEO of Marten Transport only received US$1.4m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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.

Is Marten Transport Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Marten Transport's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. However, before you get too excited we've discovered 1 warning sign for Marten Transport that you should be aware of.

As a growth investor I do like to see insider buying. But Marten Transport 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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