Does Localiza Rent a Car (BVMF:RENT3) Deserve A Spot On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Localiza Rent a Car (BVMF:RENT3). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Localiza Rent a Car

How Quickly Is Localiza Rent a Car Increasing Earnings Per Share?

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). That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Localiza Rent a Car's stratospheric annual EPS growth of 45%, 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.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Localiza Rent a Car is growing revenues, and EBIT margins improved by 12.7 percentage points to 28%, over the last year. That's great to see, on both counts.

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.

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 Localiza Rent a Car?

Are Localiza Rent a Car Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a R$38b company like Localiza Rent a Car. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth R$7.9b. That equates to 21% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add Localiza Rent a Car To Your Watchlist?

Localiza Rent a Car'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 Localiza Rent a Car 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 - Localiza Rent a Car has 2 warning signs we think you should be aware of.

Although Localiza Rent a Car 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.

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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