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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 MS INTERNATIONAL (LON:MSI). 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.
View our latest analysis for MS INTERNATIONAL
MS INTERNATIONAL's Improving Profits
MS INTERNATIONAL has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, MS INTERNATIONAL's EPS grew from UK£0.26 to UK£0.72, over the previous 12 months. Year on year growth of 180% is certainly a sight to behold. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of MS INTERNATIONAL shareholders is that EBIT margins have grown from 6.1% to 12% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Since MS INTERNATIONAL is no giant, with a market capitalisation of UK£170m, you should definitely check its cash and debt before getting too excited about its prospects.
Are MS INTERNATIONAL 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 we're pleased to report that MS INTERNATIONAL insiders own a meaningful share of the business. In fact, they own 54% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about UK£92m riding on the stock, at current prices. That's nothing to sneeze at!