Should You Be Adding Unicasa Indústria de Móveis (BVMF:UCAS3) To Your Watchlist 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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Unicasa Indústria de Móveis (BVMF:UCAS3). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Unicasa Indústria de Móveis

How Fast Is Unicasa Indústria de Móveis Growing Its Earnings Per Share?

In the last three years Unicasa Indústria de Móveis's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Unicasa Indústria de Móveis's EPS shot from R$0.17 to R$0.36, over the last year. You don't see 113% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Unicasa Indústria de Móveis shareholders can take confidence from the fact that EBIT margins are up from 8.6% to 17%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Unicasa Indústria de Móveis isn't a huge company, given its market capitalization of R$312m. That makes it extra important to check on its balance sheet strength.

Are Unicasa Indústria de Móveis Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Unicasa Indústria de Móveis insiders own a significant number of shares certainly appeals to me. Actually, with 43% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about R$133m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Unicasa Indústria de Móveis To Your Watchlist?

Unicasa Indústria de Móveis's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Unicasa Indústria de Móveis for a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Unicasa Indústria de Móveis .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.
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