It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Hosken Consolidated Investments (JSE:HCI), 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.
See our latest analysis for Hosken Consolidated Investments
How Fast Is Hosken Consolidated Investments Growing Its Earnings Per Share?
In the last three years Hosken Consolidated Investments' 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. Hosken Consolidated Investments' EPS skyrocketed from R25.82 to R39.77, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 54%.
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. While we note Hosken Consolidated Investments achieved similar EBIT margins to last year, revenue grew by a solid 20% to R23b. That's a real positive.
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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Hosken Consolidated Investments Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
While there was some insider selling, that pales in comparison to the R118m that the CEO & Executive Director, John Copelyn spent acquiring shares. The average price of which was R200 per share. Big purchases like that are well worth noting, especially for those who like to follow the insider money.