Yahoo Finance Here's Why We Think Hill & Smith (LON:HILS) Might Deserve Your Attention Today
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.
In contrast to all that, many investors prefer to focus on companies like Hill & Smith (LON:HILS), which has not only revenues, but also profits. 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.
View our latest analysis for Hill & Smith
How Fast Is Hill & Smith Growing Its Earnings Per Share?
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. Outstandingly, Hill & Smith's EPS shot from UK£0.36 to UK£0.67, over the last year. It's not often a company can achieve year-on-year growth of 87%.
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 Hill & Smith remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to UK£732m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
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 Hill & Smith.
Are Hill & Smith Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Shareholders in Hill & Smith will be more than happy to see insiders committing themselves to the company, spending UK£290k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was Executive Chairman Alan Clifford Giddins who made the biggest single purchase, worth UK£50k, paying UK£11.66 per share.
Is Hill & Smith Worth Keeping An Eye On?
Hill & Smith's earnings per share growth have been climbing higher at an appreciable rate. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over Hill & Smith could be in your best interest. However, before you get too excited we've discovered 1 warning sign for Hill & Smith that you should be aware of.
The good news is that Hill & Smith is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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.
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