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If EPS growth is important to you, Afya (NASDAQ:AFYA) presents an opportunity
Investors are often driven by the idea of discovering “the next big thing,” even if that means buying “story stocks” without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, “Improbable shots almost never pay off.” Loss-making companies can act as a sponge for capital – so investors should be careful not to waste good money after bad.
If this type of company is not your style, you like companies that generate revenue and even profits, then you may be interested in Afya (NASDAQ:AFYA). While profit isn’t the only metric you should consider when investing, it’s worth recognizing companies that can consistently produce it.
See our latest analysis for Afya
How fast is Afya growing earnings per share?
Generally, companies that experience growth in earnings per share (EPS) should see similar trends in their share price. This means that EPS growth is considered a real positive by most successful long-term investors. Impressively, Afya has grown earnings per share by 18% per year, compounded, over the past three years. If growth like this continues into the future, shareholders will have plenty to smile about.
It’s often useful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another view of the quality of a company’s growth. While we note that Afya achieved similar EBIT margins to last year, revenue grew a solid 20% to R$3.0 billion. This is encouraging news for the company!
The chart below shows how the company’s top and bottom lines have progressed over time. For more details, click on the image.
earnings and income history
Fortunately, we have access to analyst forecasts for Afya’s future earnings. You can make your own predictions without looking, or you can take a look at what the pros are predicting.
Are Afya Insiders aligned with all shareholders?
It should give investors a sense of security in owning shares in a company if insiders also own shares, creating a close alignment between their interests. So it’s good to see that Afya insiders have a significant amount of capital invested in the stock. We note that his impressive stake in the company is worth R$450 million. This equates to 28% of the company, making insiders powerful and aligned with other shareholders. Looking very bullish to investors.
Should you add Afya to your watchlist?
For growth investors, Afya’s gross earnings growth rate 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 own a sizeable portion of shares. The rapid growth and confident insiders should be enough to justify further research, so it looks like it’s a good stock to follow. Of course, just because Afya is growing doesn’t mean it’s undervalued. If you’re wondering about the review, check it out this indicator of your price/earnings ratiocompared to your industry.
The story continues
There is always the possibility of doing well by buying stocks that do not generate profits and that do not have insiders buying shares. But for those who consider these metrics important, we encourage you to check out companies that to do has these features. You can access a personalized list of companies that have demonstrated growth supported by recent insider purchases.
Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St has no position in any of the stocks mentioned.