Yahoo Finance Do Helia Group's (ASX:HLI) Earnings Warrant Your Attention?
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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Helia Group (ASX:HLI), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Helia Group
Helia Group's Improving Profits
In the last three years Helia Group's 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. In impressive fashion, Helia Group's EPS grew from AU$0.47 to AU$0.92, over the previous 12 months. Year on year growth of 95% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Helia Group shareholders can take confidence from the fact that EBIT margins are up from 81% to 95%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Helia Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Helia Group Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We note that Helia Group insiders spent AU$283k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was CEO, MD & Director Pauline Blight-Johnston who made the biggest single purchase, worth AU$204k, paying AU$2.93 per share.
The good news, alongside the insider buying, for Helia Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$21m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is Helia Group Worth Keeping An Eye On?
Helia Group's earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Helia Group belongs near the top of your watchlist. We don't want to rain on the parade too much, but we did also find 4 warning signs for Helia Group (2 can't be ignored!) that you need to be mindful of.
The good news is that Helia Group is not the only growth stock with insider buying. Here's a list of growth-focused companies in AU 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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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.
