Yahoo Finance Here's Why We Think Hibbett (NASDAQ:HIBB) Is Well Worth Watching
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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Hibbett (NASDAQ:HIBB). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.
See our latest analysis for Hibbett
Hibbett's Improving Profits
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Hibbett grew its EPS from US$3.36 to US$13.19, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?
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. Hibbett shareholders can take confidence from the fact that EBIT margins are up from 9.0% to 15%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Hibbett's forecast profits?
Are Hibbett Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
Although we did see some insider selling (worth -US$7.2m) this was overshadowed by a mountain of buying, totalling US$19m in just one year. This makes me even more interested in Hibbett because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was James Khezrie who made the biggest single purchase, worth US$17m, paying US$85.82 per share.
The good news, alongside the insider buying, for Hibbett bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$18m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 1.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Mike Longo is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Hibbett with market caps between US$400m and US$1.6b is about US$2.3m.
The Hibbett CEO received US$1.9m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Hibbett To Your Watchlist?
Hibbett's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Hibbett deserves timely attention. Still, you should learn about the 4 warning signs we've spotted with Hibbett (including 2 which are potentially serious) .
As a growth investor I do like to see insider buying. But Hibbett isn't the only one. You can see a a free list of them here.
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.
