If You Like EPS Growth Then Check Out Z.M.H Hammerman (TLV:ZMH) Before It's Too Late

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

So if you're like me, you might be more interested in profitable, growing companies, like Z.M.H Hammerman (TLV:ZMH). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Z.M.H Hammerman

How Fast Is Z.M.H Hammerman 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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Z.M.H Hammerman has managed to grow EPS by 23% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Unfortunately, Z.M.H Hammerman's revenue dropped 34% last year, but the silver lining is that EBIT margins improved from 13% to 17%. That's not ideal.

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.

Z.M.H Hammerman isn't a huge company, given its market capitalization of ₪367m. That makes it extra important to check on its balance sheet strength.

Are Z.M.H Hammerman Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Z.M.H Hammerman shares worth a considerable sum. Indeed, they hold ₪91m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 25% of the company; visible skin in the game.

Should You Add Z.M.H Hammerman To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Z.M.H Hammerman's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. You still need to take note of risks, for example - Z.M.H Hammerman has 2 warning signs we think you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

If you decide to trade Z.M.H Hammerman, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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