Is it time to put Mercator Medical (WSE: MRC) on your watchlist?
Some have more money than common sense, they say, so even companies with no income, no profit, and a history of default can easily find investors. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
Contrary to all of this, I prefer to spend time on companies like Mercator Medical (WSE: MRC), which not only has income, but also profits. While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.
Check out our latest review for Mercator Medical
How fast is Mercator Medical increasing its earnings per share?
In business, but not in life, profit is a key measure of success; and stock prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face I love, growing EPS usually makes me look twice. So you can imagine it almost knocked me down when I realized that Mercator Medical had increased their BPA from 2.14z to 115z, in a short year. When profits grow so quickly, it often means good things ahead for the business. Could this be a sign that the company has reached an inflection point?
A close look at revenue growth and profit before interest and tax (EBIT) margins can help shed light on the sustainability of recent earnings growth. Mercator Medical shareholders can be confident that EBIT margins are up 6.3% to 60% and revenue is growing. It’s great to see, on both counts.
In the graph below, you can see how the business has increased its profit and revenue over time. For more details, click on the image.
While profitability is the driving force behind the upswing, cautious investors are also always checking the balance sheet.
Are Mercator Medical insiders aligned with all shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people who run the business and its real owners. So it is good to see that the insiders of Mercator Medical have a significant amount of capital invested in the stock. To be precise, they have shares worth Z 115 million. That’s a lot of money, and that’s no small incentive to work hard. Although he only represents 4.2% of the business, the value of this investment is enough to show that insiders have a lot going on in the business.
Should you add Mercator Medical to your watchlist?
Mercator Medical’s earnings per share took off like a rocket pointed straight at the moon. This BPA growth certainly has my attention, and the large insider ownership only serves to pique my interest further. The hope is, of course, that the strong growth marks a fundamental improvement in the business economy. So, in my opinion, Mercator Medical deserves to be put on your watch list; after all, shareholders do well when the market underestimates fast-growing companies. Still, you should educate yourself about 3 warning signs we spotted with Mercator Medical (including 2 which are a bit worrying).
Of course, you can (sometimes) buy stocks that are not growing income and do not have insiders who buy stocks. But as a growth investor, I always like to check out companies that do have these characteristics. You can access a free list of them here.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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