If EPS Growth Is Important To You, Decora (WSE:DCR) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Decora (WSE:DCR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Decora with the means to add long-term value to shareholders.

View our latest analysis for Decora

Decora's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Decora's EPS shot up from zł4.85 to zł7.40; a result that's bound to keep shareholders happy. That's a impressive gain of 53%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While revenue is looking a bit flat, the good news is EBIT margins improved by 6.2 percentage points to 18%, in the last twelve months. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Decora isn't a huge company, given its market capitalisation of zł702m. That makes it extra important to check on its balance sheet strength.

Are Decora Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Decora shares worth a considerable sum. As a matter of fact, their holding is valued at zł72m. That's a lot of money, and no small incentive to work hard. That amounts to 10% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Decora Worth Keeping An Eye On?

For growth investors, Decora's raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Decora that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Polish companies which have demonstrated growth backed by significant insider holdings.

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.