Is Now The Time To Put Hexcel (NYSE:HXL) On Your Watchlist?

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hexcel (NYSE:HXL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hexcel with the means to add long-term value to shareholders.

View our latest analysis for Hexcel

How Fast Is Hexcel Growing Its Earnings Per Share?

In the last three years Hexcel'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. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Hexcel's EPS soared from US$1.25 to US$1.63, over the last year. That's a commendable gain of 31%.

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. Hexcel maintained stable EBIT margins over the last year, all while growing revenue 6.4% to US$1.9b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Hexcel.

Are Hexcel 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. 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.

We do note that, in the last year, insiders sold US$688k worth of shares. But that's far less than the US$3.2m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Hexcel'sfuture. We also note that it was the CEO, President & Chairman, Thomas Gentile, who made the biggest single acquisition, paying US$994k for shares at about US$66.53 each.

The good news, alongside the insider buying, for Hexcel bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$43m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.8%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Hexcel Deserve A Spot On Your Watchlist?

For growth investors, Hexcel's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. Astute investors will want to keep this stock on watch. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Hexcel is trading on a high P/E or a low P/E, relative to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hexcel, you'll probably love this curated collection of companies in the US 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.