The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit, and a history of failure can successfully find investors. But as Peter Lynch said in One Up on Wall Street, “Long shots almost never pay off.” Loss-making companies are always in a race against time to achieve financial viability, so investors in these companies may take on more risk than they should.
If this type of business isn’t your style, and you like businesses that generate revenue or even profit, then you might be interested in MGIC investment (NYSE:MTG). While profit isn’t the only metric to consider when investing, it’s worth recognizing companies that can consistently produce it.
Discover our latest analysis for MGIC Investment
How fast is MGIC investment growing?
Typically, companies experiencing earnings per share (EPS) growth should see similar stock price trends. Therefore, there are many investors who like to buy shares in companies that grow EPS. Over the past three years, MGIC Investment has grown EPS by 11% per year. That’s a good growth rate, if it can be sustained.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. While revenues seem a bit flat, the good news is that EBIT margins have improved by 22.1 percentage points to 92% over the last twelve months. Which is a great look for the company.
You can check the company’s revenue and profit growth trend in the table below. For more details, click on the image.
Of course, the trick is to find stocks that have their best days in the future, not in the past. You can of course base your opinion on past performance, but you can also check out this interactive chart of EPS forecasts from professional analysts for MGIC Investment.
Are MGIC investment insiders aligned with all shareholders?
Insider interest in a company always sparks a bit of intrigue, and many investors are looking for companies where insiders are putting their money where they say. Because often buying stocks is a sign that the buyer considers them undervalued. However, small purchases don’t always reveal conviction, and insiders don’t always get it right.
The top brass at MGIC Investment are certainly in sync, having sold no shares, over the past year. But the biggest problem is that the independent director, Daniel Arrigoni, paid US$71,000 to buy shares at an average price of US$14.19. Such strong buying could be a sign of opportunity.
In addition to insider buying, it’s good to see that MGIC Investment insiders have a valuable investment in the company. To be precise, they own $44 million worth of stock. It shows strong buy-in and can indicate belief in the business strategy. Even though that’s only about 1.0% of the company, it’s enough money to indicate alignment between company executives and common shareholders.
Should you add MGIC Investment to your watchlist?
A positive point for MGIC Investment is that it increases EPS. It’s nice to see. On top of that, we’ve seen insiders buy stocks even if they already have a lot. That makes the company a prime candidate for your watchlist — and arguably a search priority. Even so, know that MGIC Investment shows 2 warning signs in our investment analysis and 1 of them does not suit us too much…
Passionate growth investors like to see insider buying. Fortunately, MGIC Investment is not alone. You can see a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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