Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Manning & Napier (NYSE:MN). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is Manning & Napier Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Manning & Napier’s EPS went from US$0.18 to US$0.99 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
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 Manning & Napier is growing revenues, and EBIT margins improved by 6.9 percentage points to 19%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company’s bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Manning & Napier is no giant, with a market capitalization of US$179m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Manning & Napier Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
For the sake of balance, I do note Manning & Napier insiders sold -US$51k worth of shares last year. But that is far less than the large US$173k share acquisition by Director of Investments Ebrahim Busheri.
On top of the insider buying, it’s good to see that Manning & Napier insiders have a valuable investment in the business. Indeed, they hold US$29m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 16% of the company, demonstrating a degree of high-level alignment with shareholders.
Does Manning & Napier Deserve A Spot On Your Watchlist?
Manning & Napier’s earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Manning & Napier deserves timely attention. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Manning & Napier , and understanding them should be part of your investment process.
The good news is that Manning & Napier is not the only growth stock with insider buying. Here’s a list of them… with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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.
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