Does Himax Technologies (NASDAQ:HIMX) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
March 21, 2022
NasdaqGS:HIMX
Source: Shutterstock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Himax Technologies (NASDAQ:HIMX). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Himax Technologies

How Fast Is Himax Technologies Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Himax Technologies's EPS went from US$0.27 to US$2.51 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. The good news is that Himax Technologies is growing revenues, and EBIT margins improved by 28.7 percentage points to 35%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NasdaqGS:HIMX Earnings and Revenue History March 21st 2022

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Himax Technologies EPS 100% free.

Are Himax Technologies Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Himax Technologies insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$587m. That equates to 29% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Is Himax Technologies Worth Keeping An Eye On?

Himax Technologies's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Himax Technologies is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We don't want to rain on the parade too much, but we did also find 3 warning signs for Himax Technologies (1 can't be ignored!) that you need to be mindful 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.

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