Stock Analysis

With EPS Growth And More, Howden Joinery Group (LON:HWDN) Is Interesting

  •  Updated
LSE:HWDN
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Howden Joinery Group (LON:HWDN). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Howden Joinery Group

How Quickly Is Howden Joinery Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Howden Joinery Group's EPS has grown 20% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Howden Joinery Group is growing revenues, and EBIT margins improved by 6.6 percentage points to 19%, over the last year. That's great to see, on both counts.

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

earnings-and-revenue-history
LSE:HWDN Earnings and Revenue History May 4th 2022

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Howden Joinery Group EPS 100% free.

Are Howden Joinery Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's good to see Howden Joinery Group insiders walking the walk, by spending UK£537k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. We also note that it was the CEO & Executive Director, Andrew Livingston, who made the biggest single acquisition, paying UK£154k for shares at about UK£7.92 each.

Is Howden Joinery Group Worth Keeping An Eye On?

You can't deny that Howden Joinery Group has grown its earnings per share at a very impressive rate. That's attractive. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. To put it succinctly; Howden Joinery Group is a strong candidate for your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Howden Joinery Group that you need to be mindful of.

The good news is that Howden Joinery Group 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.

Valuation is complex, but we're helping make it simple.

Find out whether Howden Joinery Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis