With EPS Growth And More, Hawkins (NASDAQ:HWKN) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Hawkins (NASDAQ:HWKN). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Hawkins

Hawkins's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud Hawkins's stratospheric annual EPS growth of 44%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. Hawkins maintained stable EBIT margins over the last year, all while growing revenue 26% to US$715m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Hawkins Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Like a sturdy phalanx Hawkins insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Executive VP, Jeffrey Oldenkamp, paid US$91k to buy shares at an average price of US$39.75.

The good news, alongside the insider buying, for Hawkins bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$53m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to make me think that management will be very focussed on long term growth.

Does Hawkins Deserve A Spot On Your Watchlist?

Hawkins's earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest Hawkins belongs on the top of your watchlist. It is worth noting though that we have found 2 warning signs for Hawkins (1 makes us a bit uncomfortable!) that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hawkins, 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.

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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.