Here's Why MTN Group (JSE:MTN) Has Caught The Eye Of Investors
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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like MTN Group (JSE:MTN). 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.
How Fast Is MTN Group 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years MTN Group grew its EPS by 5.0% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of MTN Group shareholders is that EBIT margins have grown from 29% to 32% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
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.
See our latest analysis for MTN Group
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for MTN Group's future profits.
Are MTN 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Although we did see some insider selling (worth R33m) this was overshadowed by a mountain of buying, totalling R92m in just one year. This adds to the interest in MTN Group because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Group President Ralph Mupita who made the biggest single purchase, worth R40m, paying R192 per share.
On top of the insider buying, it's good to see that MTN Group insiders have a valuable investment in the business. Indeed, they hold R390m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is MTN Group Worth Keeping An Eye On?
As previously touched on, MTN Group is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. You still need to take note of risks, for example - MTN Group has 1 warning sign we think you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of MTN 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.