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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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like MDA Space (TSE:MDA), which has not only revenues, but also profits. 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 MDA Space
How Fast Is MDA Space Growing Its Earnings Per Share?
Over the last three years, MDA Space has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. MDA Space's EPS shot up from CA$0.37 to CA$0.56; a result that's bound to keep shareholders happy. That's a fantastic gain of 52%.
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. EBIT margins for MDA Space remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to CA$939m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of MDA Space's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are MDA Space 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, small purchases are not always indicative of conviction, and insiders don't always get it right.
We do note that, in the last year, insiders sold CA$23k worth of shares. But that's far less than the CA$3.5m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about MDA Space'sfuture. We also note that it was the Independent Chairman of the Board, Brendan Paddick, who made the biggest single acquisition, paying CA$1.8m for shares at about CA$26.87 each.