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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 MTQ (SGX:M05), which has not only revenues, but also profits. 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 MTQ
How Fast Is MTQ Growing Its Earnings Per Share?
Over the last three years, MTQ 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. Impressively, MTQ's EPS catapulted from S$0.019 to S$0.043, over the last year. Year on year growth of 131% is certainly a sight to behold.
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. Despite consistency in EBIT margins year on year, MTQ has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
MTQ isn't a huge company, given its market capitalisation of S$67m. That makes it extra important to check on its balance sheet strength.
Are MTQ Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that MTQ insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at S$23m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 35% of the shares on issue for the business, an appreciable amount considering the market cap.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to MTQ, with market caps under S$261m is around S$538k.