If EPS Growth Is Important To You, Dyna-Mac Holdings (SGX:NO4) Presents An Opportunity

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 Dyna-Mac Holdings (SGX:NO4). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Dyna-Mac Holdings

Dyna-Mac Holdings' Improving Profits

In the last three years Dyna-Mac Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Dyna-Mac Holdings' EPS grew from S$0.013 to S$0.027, over the previous 12 months. Year on year growth of 114% is certainly a sight to behold. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. Dyna-Mac Holdings shareholders can take confidence from the fact that EBIT margins are up from 2.1% to 4.8%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Dyna-Mac Holdings isn't a huge company, given its market capitalisation of S$397m. That makes it extra important to check on its balance sheet strength.

Are Dyna-Mac Holdings Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Dyna-Mac Holdings insiders have a significant amount of capital invested in the stock. Indeed, they hold S$31m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 7.9% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Dyna-Mac Holdings Deserve A Spot On Your Watchlist?

Dyna-Mac Holdings' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Dyna-Mac Holdings for a spot on your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Dyna-Mac Holdings is trading on a high P/E or a low P/E, relative to its industry.

Although Dyna-Mac Holdings 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 Singaporean 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.