With EPS Growth And More, Duratec (ASX:DUR) Makes An Interesting Case
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 currently lacks a track record of revenue and 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Duratec (ASX:DUR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Duratec with the means to add long-term value to shareholders.
View our latest analysis for Duratec
Duratec's Earnings Per Share Are Growing
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Duratec has managed to grow EPS by 19% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Duratec remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 36% to AU$556m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Duratec.
Are Duratec Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Duratec followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at AU$96m, they have plenty of motivation to push the business to succeed. Amounting to 32% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
Should You Add Duratec To Your Watchlist?
For growth investors, Duratec's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Duratec's continuing strength. 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 Duratec that you should be aware of.
Although Duratec 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 Australian 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com