Here's Why We Think Technos (BVMF:TECN3) Might Deserve Your Attention Today

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 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 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 Technos (BVMF:TECN3). 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 Technos

How Fast Is Technos Growing Its Earnings Per Share?

Technos has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Technos' EPS shot up from R$0.67 to R$0.89; a result that's bound to keep shareholders happy. That's a commendable gain of 33%.

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. It was a year of stability for Technos as both revenue and EBIT margins remained have been flat over the past year. That's not a major concern but nor does it point to the long term growth we like to see.

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.

Since Technos is no giant, with a market capitalisation of R$273m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Technos Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Technos will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 52% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about R$143m riding on the stock, at current prices. That's nothing to sneeze at!

Is Technos Worth Keeping An Eye On?

For growth investors, Technos' raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Still, you should learn about the 3 warning signs we've spotted with Technos.

Although Technos certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Brazilian companies that not only boast of strong growth but have strong insider backing.

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.