In This Article:
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Mensch und Maschine Software (ETR:MUM), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mensch und Maschine Software with the means to add long-term value to shareholders.
See our latest analysis for Mensch und Maschine Software
How Fast Is Mensch und Maschine Software Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Mensch und Maschine Software managed to grow EPS by 16% per year, over three years. That's a good rate of growth, if it can be sustained.
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. While we note Mensch und Maschine Software achieved similar EBIT margins to last year, revenue grew by a solid 4.7% to €350m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Mensch und Maschine Software's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Mensch und Maschine Software Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Mensch und Maschine Software insiders own a meaningful share of the business. Actually, with 47% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. And their holding is extremely valuable at the current share price, totalling €416m. That means they have plenty of their own capital riding on the performance of the business!