With EPS growth and more, Home Capital Group (TSE: HCG) is interesting
Like a puppy chasing its tail, some new investors often chase “the next big thing,” even if that means buying “history stocks” with no income, let alone profit. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like Home Capital Group (TSE: HCG). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. While a well-funded business can suffer losses for years to come, unless its owners have an endless appetite to subsidize the customer, it will eventually have to generate a profit, or else take its last breath.
Check out our latest analysis for Home Capital Group
How fast is Home Capital Group growing?
If a company can sustain earnings per share (EPS) growth long enough, its stock price will eventually follow. Therefore, many investors like to buy stocks of companies with growing EPS. For my part, I am blown away by the fact that Home Capital Group has increased its EPS by 46% per year, over the past three years. This kind of growth never lasts for long, but like a shooting star, it’s worth watching when it does.
I like to look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another idea of how well the business is growing. I see that Home Capital Group turnover operations was lower than its turnover for the last twelve months, which could skew my analysis of its margins. While we believe Home Capital Group’s EBIT margins have been stable over the past year, revenues increased 26% to C $ 597 million. It is progress.
In the graph below, you can see how the business has increased its profit and revenue over time. Click on the graph to see the exact numbers.
Of course, the chic is to find stocks that have their best days in the future, not in the past. You can of course base your opinion on past performance, but you can also check out this interactive chart of Professional Analyst EPS Forecasts for Home Capital Group.
Are Home Capital Group Insiders Aligned with All Shareholders?
Like street kids who stand up for their beliefs, buying insider shares gives me reason to believe in a better future. This view is based on the possibility that stock purchases signal an uptrend on behalf of the buyer. Small purchases aren’t always indicative of conviction, however, and insiders don’t always make the right choices.
In the past 12 months, Home Capital Group insiders have spent C $ 110,000 more buying stocks than they got by selling them. While I don’t particularly like to see it sell, the fact that they put in more capital than they took out is positive in my mind. Zooming in, we can see that the biggest insider buy was made by independent director James Lisson for C $ 89,000 of shares, at around C $ 29.63 per share.
Does Home Capital Group deserve to be watched?
Home Capital Group profits took off like any random cryptocurrency, in 2017. Growth investors should find it difficult to look past this sharp move in EPS. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. Of course, just because Home Capital Group is growing doesn’t mean it’s undervalued. If you’re wondering about valuation, check out this gauge of its price / earnings ratio, relative to its industry.
The good news is that Home Capital Group isn’t the only growth stock doing insider buying. Here’s a list of them … with insider buys over the past three months!
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.