Stock Analysis

Should You Be Adding Ouro Fino Saúde Animal Participações (BVMF:OFSA3) To Your Watchlist Today?

BOVESPA:OFSA3
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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 Ouro Fino Saúde Animal Participações (BVMF:OFSA3). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

View our latest analysis for Ouro Fino Saúde Animal Participações

How Fast Is Ouro Fino Saúde Animal Participações Growing Its Earnings Per Share?

Over the last three years, Ouro Fino Saúde Animal Participações has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Ouro Fino Saúde Animal Participações's EPS shot from R$0.75 to R$1.54, over the last year. You don't see 106% year-on-year growth like that, very often.

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). While we note Ouro Fino Saúde Animal Participações's EBIT margins were flat over the last year, revenue grew by a solid 18% to R$706m. That's a real positive.

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

earnings-and-revenue-history
BOVESPA:OFSA3 Earnings and Revenue History November 27th 2020

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 Ouro Fino Saúde Animal Participações?

Are Ouro Fino Saúde Animal Participações 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 Ouro Fino Saúde Animal Participações insiders own a significant number of shares certainly appeals to me. In fact, they own 56% 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. In terms of absolute value, insiders have R$979m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Ouro Fino Saúde Animal Participações Worth Keeping An Eye On?

Ouro Fino Saúde Animal Participações'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. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Ouro Fino Saúde Animal Participações is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You still need to take note of risks, for example - Ouro Fino Saúde Animal Participações has 1 warning sign we think you should be aware of.

Although Ouro Fino Saúde Animal Participações 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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Valuation is complex, but we're helping make it simple.

Find out whether Ouro Fino Saúde Animal Participações is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. 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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