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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 MotorCycle Holdings (ASX:MTO). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for MotorCycle Holdings
How Fast Is MotorCycle Holdings 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. Shareholders will be happy to know that MotorCycle Holdings' EPS has grown 36% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note MotorCycle Holdings achieved similar EBIT margins to last year, revenue grew by a solid 11% to AU$447m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of MotorCycle Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are MotorCycle Holdings Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
MotorCycle Holdings insiders both bought and sold shares over the last twelve months, but they did end up spending AU$72k more on stock than they received from selling it. At face value we can consider this a fairly encouraging sign for the company. Zooming in, we can see that the biggest insider purchase was by Co-Founder David Ahmet for AU$64k worth of shares, at about AU$2.97 per share.