Is Now The Time To Put Hensoldt (ETR:5UH) On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hensoldt (ETR:5UH). 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 Hensoldt

Hensoldt's Improving Profits

In the last three years Hensoldt's 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. As a result, we'll zoom in on growth over the last year, instead. In previous twelve months, Hensoldt's EPS has risen from €0.65 to €0.70. That's a fair increase of 7.7%.

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. EBIT margins for Hensoldt remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to €1.8b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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 Hensoldt's future EPS 100% free.

Are Hensoldt Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Hensoldt, with market caps between €1.9b and €6.0b, is around €2.3m.

Hensoldt's CEO took home a total compensation package worth €1.4m in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Hensoldt Deserve A Spot On Your Watchlist?

One positive for Hensoldt is that it is growing EPS. That's nice to see. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. All things considered, Hensoldt is definitely worth taking a deeper dive into. We should say that we've discovered 1 warning sign for Hensoldt that you should be aware of before investing here.

Although Hensoldt certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.