We Ran A Stock Scan For Earnings Growth And Momentum Group (JSE:MTM) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Momentum Group (JSE:MTM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Momentum Group with the means to add long-term value to shareholders.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Momentum Group's Improving Profits

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. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Momentum Group's EPS catapulted from R2.31 to R3.93, over the last year. It's a rarity to see 70% year-on-year growth like that.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Momentum Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. It was a year of stability for Momentum Group as both revenue and EBIT margins remained have been flat over the past year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

View our latest analysis for Momentum Group

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Momentum Group's future EPS 100% free.

Are Momentum Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Momentum Group insiders refrain from selling stock during the year, but they also spent R1.8m buying it. That's nice to see, because it suggests insiders are optimistic.

Is Momentum Group Worth Keeping An Eye On?

Momentum Group's earnings per share have been soaring, with growth rates sky high. Growth-minded people will be intrigued by the incredible movement in EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this these factors intrigue you, then an addition of Momentum Group to your watchlist won't go amiss. Still, you should learn about the 1 warning sign we've spotted with Momentum Group.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.