Does H & M Hennes & Mauritz (STO:HM B) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like H & M Hennes & Mauritz (STO:HM B), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for H & M Hennes & Mauritz

H & M Hennes & Mauritz's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. We can see that in the last three years H & M Hennes & Mauritz grew its EPS by 6.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. The good news is that H & M Hennes & Mauritz is growing revenues, and EBIT margins improved by 3.9 percentage points to 6.8%, over the last year. 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. Click on the chart to see the exact numbers.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for H & M Hennes & Mauritz?

Are H & M Hennes & Mauritz 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.

One gleaming positive for H & M Hennes & Mauritz, in the last year, is that a certain insider has buying shares with ample enthusiasm. In one big hit, Non-Independent Chairman Karl-Johan Persson paid kr316m, for shares at an average price of kr146 per share. Seeing such high conviction in the company is a huge positive for shareholders and should instil confidence in their mission.

On top of the insider buying, it's good to see that H & M Hennes & Mauritz insiders have a valuable investment in the business. We note that their impressive stake in the company is worth kr25b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does H & M Hennes & Mauritz Deserve A Spot On Your Watchlist?

One positive for H & M Hennes & Mauritz is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. However, before you get too excited we've discovered 1 warning sign for H & M Hennes & Mauritz that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of H & M Hennes & Mauritz, you'll probably love this curated collection of companies in SE that have witnessed growth alongside 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.