Does Harel Insurance Investments & Financial Services (TLV:HARL) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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 contrast to all that, I prefer to spend time on companies like Harel Insurance Investments & Financial Services (TLV:HARL), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Harel Insurance Investments & Financial Services

Harel Insurance Investments & Financial Services's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Harel Insurance Investments & Financial Services has grown EPS by 13% per year. That's a good rate of growth, if it can be sustained.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Harel Insurance Investments & Financial Services's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Harel Insurance Investments & Financial Services maintained stable EBIT margins over the last year, all while growing revenue 72% to ₪28b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Harel Insurance Investments & Financial Services's balance sheet strength, before getting too excited.

Are Harel Insurance Investments & Financial Services Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalizations between ₪6.2b and ₪20b, like Harel Insurance Investments & Financial Services, the median CEO pay is around ₪5.0m.

Harel Insurance Investments & Financial Services offered total compensation worth ₪3.5m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Harel Insurance Investments & Financial Services To Your Watchlist?

As I already mentioned, Harel Insurance Investments & Financial Services is a growing business, which is what I like to see. On top of that, my faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all I think it's worth at least considering for your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Harel Insurance Investments & Financial Services that you need to be mindful of.

Although Harel Insurance Investments & Financial Services certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.