Here's Why We Think Hargreaves Services (LON:HSP) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Hargreaves Services (LON:HSP). 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.

Check out our latest analysis for Hargreaves Services

How Fast Is Hargreaves Services Growing Its Earnings Per Share?

Over the last three years, Hargreaves Services has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Hargreaves Services' EPS soared from UK£0.78 to UK£1.29, over the last year. That's a impressive gain of 64%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Hargreaves Services shareholders can take confidence from the fact that EBIT margins are up from 0.6% to 4.6%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Hargreaves Services is no giant, with a market capitalisation of UK£157m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Hargreaves Services Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, Non-Executive Director Nicholas Harwood Mills spent UK£39k acquiring shares, doing so at an average price of UK£3.90. Purchases like this clue us in to the to the faith management has in the business' future.

Along with the insider buying, another encouraging sign for Hargreaves Services is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at UK£16m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 10% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Hargreaves Services Worth Keeping An Eye On?

For growth investors, Hargreaves Services' raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Hargreaves Services that you need to be mindful of.

The good news is that Hargreaves Services 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.

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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.