With EPS Growth And More, Hosken Consolidated Investments (JSE:HCI) Makes An Interesting Case

It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Hosken Consolidated Investments (JSE:HCI). 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 Hosken Consolidated Investments

How Fast Is Hosken Consolidated Investments Growing Its Earnings Per Share?

In the last three years Hosken Consolidated Investments’ 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. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Hosken Consolidated Investments’ EPS catapulted from R16.49 to R35.91, over the last year. It’s not often a company can achieve year-on-year growth of 118%.

It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. Hosken Consolidated Investments maintained stable EBIT margins over the last year, all while growing revenue 25% to R22b. That’s progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history

While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Hosken Consolidated Investments’ balance sheet strength, before getting too excited.

Are Hosken Consolidated Investments Insiders Aligned With All Shareholders?

It’s a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Hosken Consolidated Investments followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Notably, they have an enviable stake in the company, worth R1.8b. That equates to 15% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Should You Add Hosken Consolidated Investments To Your Watchlist?

Hosken Consolidated Investments’ earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it’s worth considering Hosken Consolidated Investments for a spot on your watchlist. We don’t want to rain on the parade too much, but we did also find 3 warning signs for Hosken Consolidated Investments (1 is significant!) that you need to be mindful of.

Although Hosken Consolidated Investments 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.

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