Do Meridian Bioscience's (NASDAQ:VIVO) Earnings Warrant Your Attention?
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like Meridian Bioscience (NASDAQ:VIVO), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
See our latest analysis for Meridian Bioscience
How Fast Is Meridian Bioscience Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Meridian Bioscience has managed to grow EPS by 26% 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 smiling.
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. The good news is that Meridian Bioscience is growing revenues, and EBIT margins improved by 2.6 percentage points to 24%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Meridian Bioscience EPS 100% free.
Are Meridian Bioscience Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's good to see Meridian Bioscience insiders walking the walk, by spending US$659k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. It is also worth noting that it was President John Kenny who made the biggest single purchase, worth US$174k, paying US$5.78 per share.
It's reassuring that Meridian Bioscience insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. I refer to the very reasonable level of CEO pay. I discovered that the median total compensation for the CEOs of companies like Meridian Bioscience with market caps between US$400m and US$1.6b is about US$2.8m.
The Meridian Bioscience CEO received total compensation of just US$1.3m in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is Meridian Bioscience Worth Keeping An Eye On?
You can't deny that Meridian Bioscience has grown its earnings per share at a very impressive rate. That's attractive. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The message I'd take from this quick rundown is that, yes, this stock is worth investigating further. However, before you get too excited we've discovered 3 warning signs for Meridian Bioscience (1 makes us a bit uncomfortable!) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Meridian Bioscience, 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.
This article by Simply Wall St is general in nature. 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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