Masterflex (ETR:MZX) Checks All the Boxes When It Comes to Earnings Growth

Investors are often driven by the idea of ​​discovering the next big thing, even if that means buying “story stocks” with no revenue, let alone profits. Unfortunately, these risky investments are unlikely to ever become profitable, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to achieve financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all this, many investors prefer to focus on companies like Masterflex (ETR:MZX), which has not only revenues but also profits. This does not mean that the company offers the best investment opportunity, but profitability is a key component for success in business.

View our latest analysis for Masterflex

Masterflex’s Rising Profits

Over the past three years, Masterflex has grown earnings per share (EPS) at an impressive rate from a relatively low base, resulting in a three-year growth rate that is not particularly indicative of expected future performance. As such, it would be better to isolate the growth rate over the past year for the purposes of our analysis. It is good to see that Masterflex’s EPS has grown from €0.76 to €0.89 over twelve months. This equates to a gain of 17%; a figure that shareholders will be happy to see.

It’s often useful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another perspective on the quality of the company’s growth. Masterflex’s EBIT margins have improved by 2.2 percentage points over the past year, to 13%, but on the other hand revenue fell by 4.0%. That’s not a good picture.

You can see the company’s revenue and profit growth trend in the chart below. Click on the chart to see the exact numbers.

Fortunately, we have access to Masterflex’s analyst forecasts future profit. You can make your own predictions without looking, or you can take a look at what the professionals are predicting.

The story continues

Are Masterflex insiders aligned with all shareholders?

It’s nice to see company leaders putting their money on the line, so to speak, because it increases the alignment of incentives between the people running the company and the real owners. Shareholders will be pleased to know that insiders own a significant amount of Masterflex stock. To be precise, they own €27 million worth of shares. This significant investment should help to increase the value of the company in the long term. That amounts to 28% of the company, which shows a high level of alignment with shareholders.

Is Masterflex worth keeping an eye on?

As mentioned, Masterflex is a growing company, which is encouraging. If that wasn’t enough on its own, there’s also the decent level of insider ownership. These two factors are a huge highlight for the company, which should be a strong contender on your watchlists. You still need to be aware of risks, for example – Masterflex has 1 warning sign that we think you should be aware of.

There is always the opportunity to perform well by buying stocks that are not growing profits and don’t do insiders buy stocks. But for those considering these important metrics, we recommend looking at companies that Doing have those characteristics. You can access a customized list of German companies that have shown growth, supported by significant insider holdings.

Please note that the insider transactions discussed in this article are reportable transactions in the relevant jurisdiction.

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This article from Simply Wall St is general in nature. We comment solely on historical data and analyst forecasts, using an objective methodology. Our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or financial situation. We aim to provide you with a long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in the shares mentioned.