Here's Why Howard Hughes (NYSE:HHC) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Howard Hughes (NYSE:HHC). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Howard Hughes

Howard Hughes' Improving Profits

Howard Hughes 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. Thus, it makes sense to focus on more recent growth rates, instead. Howard Hughes' EPS skyrocketed from US$2.32 to US$3.22, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 39%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Howard Hughes is growing revenues, and EBIT margins improved by 4.6 percentage points to 21%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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 Howard Hughes.

Are Howard Hughes Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Howard Hughes followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at US$47m. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 1.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to 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. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between US$2.0b and US$6.4b, like Howard Hughes, the median CEO pay is around US$6.6m.

Howard Hughes' CEO took home a total compensation package of US$2.6m in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Howard Hughes Worth Keeping An Eye On?

You can't deny that Howard Hughes has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Howard Hughes look rather interesting indeed. Even so, be aware that Howard Hughes is showing 1 warning sign in our investment analysis , you should know about...

Although Howard Hughes certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.