Yahoo Finance If EPS Growth Is Important To You, Hillenbrand (NYSE:HI) Presents An Opportunity
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Hillenbrand (NYSE:HI). 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 Hillenbrand
How Quickly Is Hillenbrand Increasing Earnings Per Share?
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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Hillenbrand has grown EPS by 30% per year, compound, in the last 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. While we note Hillenbrand achieved similar EBIT margins to last year, revenue grew by a solid 11% to US$3.0b. 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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Hillenbrand's future EPS 100% free.
Are Hillenbrand 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
First things first, there weren't any reports of insiders selling shares in Hillenbrand in the last 12 months. But the important part is that CFO & Senior VP Robert VanHimbergen spent US$264k buying stock, at an average price of US$44.00. Big buys like that may signal an opportunity; actions speak louder than words.
On top of the insider buying, it's good to see that Hillenbrand insiders have a valuable investment in the business. As a matter of fact, their holding is valued at US$28m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Hillenbrand's CEO, Kim Ryan, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$2.0b and US$6.4b, like Hillenbrand, the median CEO pay is around US$6.4m.
The Hillenbrand CEO received US$5.0m in compensation for the year ending September 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Does Hillenbrand Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Hillenbrand's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. However, before you get too excited we've discovered 1 warning sign for Hillenbrand that you should be aware of.
The good news is that Hillenbrand 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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