Yahoo Finance Here's Why We Think Medallion Financial (NASDAQ:MFIN) Might Deserve Your Attention Today
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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Medallion Financial (NASDAQ:MFIN), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Medallion Financial
Medallion Financial's Improving Profits
In the last three years Medallion Financial's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Medallion Financial's EPS shot up from US$1.67 to US$2.27; a result that's bound to keep shareholders happy. That's a commendable gain of 35%.
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. It's noted that Medallion Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Medallion Financial achieved similar EBIT margins to last year, revenue grew by a solid 19% to US$209m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Medallion Financial's future profits.
Are Medallion Financial Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Despite US$23k worth of sales, Medallion Financial insiders have overwhelmingly been buying the stock, spending US$281k on purchases in the last twelve months. An optimistic sign for those with Medallion Financial in their watchlist. Zooming in, we can see that the biggest insider purchase was by company insider David Orr for US$116k worth of shares, at about US$7.41 per share.
On top of the insider buying, it's good to see that Medallion Financial insiders have a valuable investment in the business. To be specific, they have US$44m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 22% of the company, demonstrating a degree of high-level alignment with shareholders.
Does Medallion Financial Deserve A Spot On Your Watchlist?
You can't deny that Medallion Financial has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. Astute investors will want to keep this stock on watch. We don't want to rain on the parade too much, but we did also find 3 warning signs for Medallion Financial (2 shouldn't be ignored!) that you need to be mindful of.
The good news is that Medallion Financial 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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