With EPS Growth And More, Hill & Smith (LON:HILS) Makes An Interesting Case

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

In contrast to all that, many investors prefer to focus on companies like Hill & Smith (LON:HILS), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Hill & Smith

How Fast Is Hill & Smith Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Hill & Smith'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 satisfied.

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 21% to UK£803m. That's encouraging news for the company!

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.

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?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The real kicker here is that Hill & Smith insiders spent a staggering UK£1.1m on acquiring shares in just one year, without single share being sold in the meantime. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Executive Chairman, Alan Clifford Giddins, who made the biggest single acquisition, paying UK£633k for shares at about UK£14.49 each.

Does Hill & Smith Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Hill & Smith's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. So on this analysis, Hill & Smith is probably worth spending some time on. Now, you could try to make up your mind on Hill & Smith by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

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 free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.