Yahoo Finanzas Does Mr Price Group (JSE:MRP) Deserve A Spot On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Mr Price Group (JSE:MRP). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Mr Price Group
Mr Price Group's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. We can see that in the last three years Mr Price Group grew its EPS by 7.6% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Mr Price Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Mr Price Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 16% to R38b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Mr Price Group.
Are Mr Price Group Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.
Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the bigger deal is that the Honorary Chairman & Co-Founder, Stewart Cohen, paid R924k to buy shares at an average price of R132. Purchases like this clue us in to the to the faith management has in the business' future.
The good news, alongside the insider buying, for Mr Price Group bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have R445m worth of shares. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Mark Blair, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Mr Price Group with market caps between R36b and R116b is about R23m.
The CEO of Mr Price Group only received R11m in total compensation for the year ending April 2023. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Mr Price Group To Your Watchlist?
As previously touched on, Mr Price Group is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Before you take the next step you should know about the 1 warning sign for Mr Price Group that we have uncovered.
The good news is that Mr Price Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in ZA 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.
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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
