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. 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.
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 (NASDAQ:MMSI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Merit Medical Systems has managed to grow EPS by 34% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Merit Medical Systems maintained stable EBIT margins over the last year, all while growing revenue 8.2% to US$1.4b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
View our latest analysis for Merit Medical Systems
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Merit Medical Systems' future EPS 100% free.
We would not expect to see insiders owning a large percentage of a US$5.6b company like Merit Medical Systems. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$132m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
