Here's Why We Think Momentum Group (JSE:MTM) Might Deserve Your Attention Today

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 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Momentum Group (JSE:MTM), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Momentum Group

How Fast Is Momentum Group Growing Its Earnings Per Share?

Over the last three years, Momentum Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Momentum Group's EPS shot up from R2.20 to R2.83; a result that's bound to keep shareholders happy. That's a fantastic gain of 29%.

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. It seems Momentum Group is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are Momentum Group 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news for Momentum Group shareholders is that no insiders reported selling shares in the last year. Add in the fact that Risto Ketola, the Group Finance Director & Executive Director of the company, paid R285k for shares at around R28.45 each. It seems that at least one insider is prepared to show the market there is potential within Momentum Group.

Should You Add Momentum Group To Your Watchlist?

For growth investors, Momentum Group's raw rate of earnings growth is a beacon in the night. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, Momentum Group is probably worth spending some time on. However, before you get too excited we've discovered 1 warning sign for Momentum Group that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Momentum Group, you'll probably love this curated collection of companies in ZA that have an attractive valuation alongside 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.