Stock Analysis

Does Hamama Meir Trading (1996) (TLV:HMAM) Deserve A Spot On Your Watchlist?

TASE:HMAM
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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. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Hamama Meir Trading (1996) (TLV:HMAM). 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.

Check out our latest analysis for Hamama Meir Trading (1996)

How Fast Is Hamama Meir Trading (1996) Growing Its Earnings Per Share?

Hamama Meir Trading (1996) has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Hamama Meir Trading (1996)'s EPS grew from ₪0.64 to ₪1.09, over the previous 12 months. It's not often a company can achieve year-on-year growth of 71%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Hamama Meir Trading (1996) is growing revenues, and EBIT margins improved by 2.2 percentage points to 6.3%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

earnings-and-revenue-history
TASE:HMAM Earnings and Revenue History December 27th 2022

Hamama Meir Trading (1996) isn't a huge company, given its market capitalisation of ₪67m. That makes it extra important to check on its balance sheet strength.

Are Hamama Meir Trading (1996) Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Hamama Meir Trading (1996) insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 78% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Hamama Meir Trading (1996) being valued at ₪67m, this is a small company we're talking about. So despite a large proportional holding, insiders only have ₪52m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Hamama Meir Trading (1996) with market caps under ₪699m is about ₪1.6m.

Hamama Meir Trading (1996) offered total compensation worth ₪1.0m to its CEO in the year to December 2021. 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 a culture of integrity, in a broader sense.

Is Hamama Meir Trading (1996) Worth Keeping An Eye On?

Hamama Meir Trading (1996)'s earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Hamama Meir Trading (1996) is worth considering carefully. However, before you get too excited we've discovered 4 warning signs for Hamama Meir Trading (1996) (2 are a bit unpleasant!) that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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

Valuation is complex, but we're here to simplify it.

Discover if Hamama Meir Trading (1996) might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.