Here's Why We Think Empreendimentos Pague Menos (BVMF:PGMN3) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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.

So if you're like me, you might be more interested in profitable, growing companies, like Empreendimentos Pague Menos (BVMF:PGMN3). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Empreendimentos Pague Menos

Empreendimentos Pague Menos's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Empreendimentos Pague Menos's stratospheric annual EPS growth of 58%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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). Empreendimentos Pague Menos maintained stable EBIT margins over the last year, all while growing revenue 11% to R$7.4b. That's a real positive.

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.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Empreendimentos Pague Menos?

Are Empreendimentos Pague Menos Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Empreendimentos Pague Menos insiders own a significant number of shares certainly appeals to me. In fact, they own 64% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. And their holding is extremely valuable at the current share price, totalling R$3.1b. That means they have plenty of their own capital riding on the performance of the business!

Is Empreendimentos Pague Menos Worth Keeping An Eye On?

Empreendimentos Pague Menos's earnings have taken off like any random crypto-currency did, back in 2017. 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 to my mind Empreendimentos Pague Menos is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Empreendimentos Pague Menos is showing 1 warning sign in our investment analysis , you should know about...

Although Empreendimentos Pague Menos certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.