If EPS Growth Is Important To You, Direcional Engenharia (BVMF:DIRR3) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Direcional Engenharia (BVMF:DIRR3). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Direcional Engenharia with the means to add long-term value to shareholders.

See our latest analysis for Direcional Engenharia

How Fast Is Direcional Engenharia Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Direcional Engenharia has achieved impressive annual EPS growth of 37%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Direcional Engenharia maintained stable EBIT margins over the last year, all while growing revenue 22% to R$2.0b. That's encouraging news for the company!

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. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Direcional Engenharia's future EPS 100% free.

Are Direcional Engenharia 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. Direcional Engenharia followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold R$109m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 4.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Direcional Engenharia Worth Keeping An Eye On?

Direcional Engenharia's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Direcional Engenharia very closely. Before you take the next step you should know about the 2 warning signs for Direcional Engenharia that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.