For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in MGIC Investment (NYSE:MTG). 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 MGIC Investment Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years MGIC Investment grew its EPS by 16% per year. That's a good rate of growth, if it can be sustained.
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 revenue is looking a bit flat, the good news is EBIT margins improved by 31.4 percentage points to 102%, in the last twelve months. That's something to smile about.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
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 MGIC Investment's future profits.
Are MGIC Investment Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own MGIC Investment shares worth a considerable sum. To be specific, they have US$43m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.0% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add MGIC Investment To Your Watchlist?
As previously touched on, MGIC Investment is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for MGIC Investment (1 can't be ignored) you should be aware of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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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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.
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