Here’s Why We Think Manx Financial Group (LON:MFX) Might Deserve Your Attention Today

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Manx Financial Group (LON:MFX). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.

View our latest analysis for Manx Financial Group

How Fast Is Manx Financial Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you’d expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Manx Financial Group has grown EPS by 41% per year, over the last three years. While that sort of growth rate isn’t sustainable for long, it certainly catches the eye of prospective investors.

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. Our analysis has highlighted that Manx Financial Group’s revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Manx Financial Group maintained stable EBIT margins over the last year, all while growing revenue 35% to UK£34m. That’s progress.

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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.

Manx Financial Group isn’t a huge company, given its market capitalisation of UK£27m. That makes it extra important to check on its balance sheet strength.

Are Manx Financial Group Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there’s less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Manx Financial Group insiders own a significant number of shares certainly is appealing. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only UK£27m Manx Financial Group is really small for a listed company. So this large proportion of shares owned by insiders only amounts to UK£9.7m. That’s not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Manx Financial Group Deserve A Spot On Your Watchlist?

Manx Financial Group’s earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there’s a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Manx Financial Group very closely. Don’t forget that there may still be risks. For instance, we’ve identified 3 warning signs for Manx Financial Group that you should be aware of.

Although Manx Financial Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of British companies that not only boast of strong growth but have also seen recent insider buying..

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.