Here's Why We Think Mullen Group (TSE:MTL) Might Deserve Your Attention Today
Simply Wall St
4 min read
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Mullen Group (TSE:MTL), 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 Mullen Group with the means to add long-term value to shareholders.
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Mullen Group has grown EPS by 52% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. The good news is that Mullen Group is growing revenues, and EBIT margins improved by 2.4 percentage points to 11%, 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. Click on the chart to see the exact numbers.
TSX:MTL Earnings and Revenue History September 16th 2023
Are Mullen Group Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Not only did Mullen Group insiders refrain from selling stock during the year, but they also spent CA$161k buying it. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Director, Richard Whitley, who made the biggest single acquisition, paying CA$97k for shares at about CA$14.49 each.
The good news, alongside the insider buying, for Mullen Group bulls is that insiders (collectively) have a meaningful investment in the stock. Holding CA$77m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Murray Mullen is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Mullen Group, with market caps between CA$541m and CA$2.2b, is around CA$2.4m.
Mullen Group's CEO took home a total compensation package of CA$970k in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Is Mullen Group Worth Keeping An Eye On?
Mullen Group's earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Mullen Group deserves timely attention. We should say that we've discovered 3 warning signs for Mullen Group (1 doesn't sit too well with us!) that you should be aware of before investing here.
Keen growth investors love to see insider buying. Thankfully, Mullen Group isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
