Advertisement
UK markets closed
  • FTSE 100

    8,237.72
    -34.74 (-0.42%)
     
  • FTSE 250

    20,442.35
    -56.37 (-0.27%)
     
  • AIM

    772.57
    +0.19 (+0.02%)
     
  • GBP/EUR

    1.1819
    -0.0003 (-0.02%)
     
  • GBP/USD

    1.2643
    -0.0018 (-0.14%)
     
  • Bitcoin GBP

    50,744.81
    -713.54 (-1.39%)
     
  • CMC Crypto 200

    1,326.78
    -33.54 (-2.47%)
     
  • S&P 500

    5,464.62
    -8.55 (-0.16%)
     
  • DOW

    39,150.33
    +15.57 (+0.04%)
     
  • CRUDE OIL

    80.62
    -0.67 (-0.82%)
     
  • GOLD FUTURES

    2,334.20
    -34.80 (-1.47%)
     
  • NIKKEI 225

    38,596.47
    -36.55 (-0.09%)
     
  • HANG SENG

    18,028.52
    -306.80 (-1.67%)
     
  • DAX

    18,163.52
    -90.66 (-0.50%)
     
  • CAC 40

    7,628.57
    -42.77 (-0.56%)
     

Here's Why We Think Macquarie Group (ASX:MQG) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Macquarie Group (ASX:MQG). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Macquarie Group

How Fast Is Macquarie Group 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Macquarie Group managed to grow EPS by 12% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

ADVERTISEMENT

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. Not all of Macquarie Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Macquarie Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to AU$18b. That's encouraging news for the company!

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.

earnings-and-revenue-history
earnings-and-revenue-history

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 Macquarie Group.

Are Macquarie 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. 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.

Any way you look at it Macquarie Group shareholders can gain quiet confidence from the fact that insiders shelled out AU$888k to buy stock, over the last year. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was Independent Director Michelle Hinchliffe who made the biggest single purchase, worth AU$382k, paying AU$181 per share.

Along with the insider buying, another encouraging sign for Macquarie Group is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth AU$216m. While that is a lot of skin in the game, we note this holding only totals to 0.3% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Macquarie Group To Your Watchlist?

One important encouraging feature of Macquarie Group is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. You still need to take note of risks, for example - Macquarie Group has 1 warning sign we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Macquarie Group, you'll probably love this free list of growing companies that insiders are buying.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here