Do Manhattan Bridge Capital's (NASDAQ:LOAN) Earnings Warrant Your Attention?
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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Manhattan Bridge Capital (NASDAQ:LOAN). 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.
Check out our latest analysis for Manhattan Bridge Capital
Manhattan Bridge Capital's Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Manhattan Bridge Capital's EPS has grown from US$0.44 to US$0.50 over twelve months. That's a 12% gain; respectable growth in the broader scheme of things.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Manhattan Bridge Capital'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. While we note Manhattan Bridge Capital achieved similar EBIT margins to last year, revenue grew by a solid 9.7% to US$7.4m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since Manhattan Bridge Capital is no giant, with a market capitalisation of US$63m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Manhattan Bridge Capital Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Manhattan Bridge Capital followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$15m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 25% of the company; visible skin in the game.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Manhattan Bridge Capital, with market caps under US$200m is around US$677k.
The Manhattan Bridge Capital CEO received US$529k in compensation for the year ending December 2023. That is actually below the median for CEO's of similarly sized companies. 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. It can also be a sign of good governance, more generally.
Does Manhattan Bridge Capital Deserve A Spot On Your Watchlist?
One positive for Manhattan Bridge Capital is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for Manhattan Bridge Capital, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Manhattan Bridge Capital (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.
Although Manhattan Bridge Capital certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
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.