Does ACS Actividades de Construcción y Servicios (BME:ACS) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any 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. 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 ACS Actividades de Construcción y Servicios (BME:ACS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ACS Actividades de Construcción y Servicios with the means to add long-term value to shareholders.

Check out our latest analysis for ACS Actividades de Construcción y Servicios

ACS Actividades de Construcción y Servicios' Improving Profits

Over the last three years, ACS Actividades de Construcción y Servicios has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. In previous twelve months, ACS Actividades de Construcción y Servicios' EPS has risen from €3.00 to €3.25. That's a fair increase of 8.4%. We should also note that the company has boosted EPS by buying back shares, showing the strength of its balance sheet.

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. While we note ACS Actividades de Construcción y Servicios achieved similar EBIT margins to last year, revenue grew by a solid 16% to €42b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for ACS Actividades de Construcción y Servicios' future EPS 100% free.

Are ACS Actividades de Construcción y Servicios Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a €14b company like ACS Actividades de Construcción y Servicios. But we do take comfort from the fact that they are investors in the company. With a whopping €61m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Does ACS Actividades de Construcción y Servicios Deserve A Spot On Your Watchlist?

One important encouraging feature of ACS Actividades de Construcción y Servicios is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Before you take the next step you should know about the 2 warning signs for ACS Actividades de Construcción y Servicios that we have uncovered.

Although ACS Actividades de Construcción y Servicios 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 Spanish 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.