It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Hanger (NYSE:HNGR). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for Hanger
How Fast Is Hanger Growing Its Earnings Per Share?
In the last three years Hanger's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Hanger's EPS shot from US$0.50 to US$1.33, over the last year. Year on year growth of 165% is certainly a sight to behold.
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. While Hanger may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.
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.
Fortunately, we've got access to analyst forecasts of Hanger's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Hanger Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Hanger insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at US$51m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.
Should You Add Hanger To Your Watchlist?
Hanger's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Hanger is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 3 warning signs for Hanger (2 are concerning!) that you should be aware of before investing here.