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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 MS INTERNATIONAL (LON:MSI). 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 MS INTERNATIONAL
How Fast Is MS INTERNATIONAL Growing Its Earnings Per Share?
Over the last three years, MS INTERNATIONAL has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. 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£0.71, over the previous 12 months. It's not often a company can achieve year-on-year growth of 176%. That could be a sign that the business has reached a true inflection point.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that MS INTERNATIONAL is growing revenues, and EBIT margins improved by 6.1 percentage points to 12%, over the last year. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
MS INTERNATIONAL isn't a huge company, given its market capitalisation of UK£179m. That makes it extra important to check on its balance sheet strength.
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 as you can imagine, the fact that MS INTERNATIONAL insiders own a significant number of shares certainly is appealing. In fact, they own 59% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have UK£105m invested in the business, at the current share price. That's nothing to sneeze at!