Hill & Smith (LON:HILS) Ticks All The Boxes When It Comes To Earnings Growth

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Hill & Smith (LON:HILS). 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.

View our latest analysis for Hill & Smith

Hill & Smith's Improving Profits

In the last three years Hill & Smith'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. So it would be better to isolate the growth rate over the last year for our analysis. Hill & Smith boosted its trailing twelve month EPS from UK£0.81 to UK£0.96, in the last year. There's little doubt shareholders would be happy with that 18% gain.

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. While we note Hill & Smith achieved similar EBIT margins to last year, revenue grew by a solid 3.6% to UK£832m. That's progress.

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

Fortunately, we've got access to analyst forecasts of Hill & Smith's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Hill & Smith 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.

It's good to see Hill & Smith insiders walking the walk, by spending UK£278k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by CEO & Member of Executive Board Rutger Helbing for UK£204k worth of shares, at about UK£20.39 per share.

Is Hill & Smith Worth Keeping An Eye On?

One important encouraging feature of Hill & Smith is that it is growing profits. It's not easy for business to grow EPS, but Hill & Smith has shown the strengths to do just that. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. You still need to take note of risks, for example - Hill & Smith has 1 warning sign we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hill & Smith, you'll probably love this curated collection of companies in GB that have an attractive valuation 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.