Should You Be Adding Mills Estruturas e Serviços de Engenharia (BVMF:MILS3) To Your Watchlist Today?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

In contrast to all that, many investors prefer to focus on companies like Mills Estruturas e Serviços de Engenharia (BVMF:MILS3), 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.

See our latest analysis for Mills Estruturas e Serviços de Engenharia

Mills Estruturas e Serviços de Engenharia's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Mills Estruturas e Serviços de Engenharia to have grown EPS from R$0.016 to R$0.56 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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. The good news is that Mills Estruturas e Serviços de Engenharia is growing revenues, and EBIT margins improved by 15.0 percentage points to 24%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Mills Estruturas e Serviços de Engenharia Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Mills Estruturas e Serviços de Engenharia insiders have a significant amount of capital invested in the stock. Holding R$280m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 15% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

Does Mills Estruturas e Serviços de Engenharia Deserve A Spot On Your Watchlist?

Mills Estruturas e Serviços de Engenharia's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Mills Estruturas e Serviços de Engenharia is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 1 warning sign for Mills Estruturas e Serviços de Engenharia you should know about.

Although Mills Estruturas e Serviços de Engenharia certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.