Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. Unfortunately, high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson.
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like Harel Insurance Investments & Financial Services (TLV: HARL). While that doesn’t make stocks worth buying at any price, you can’t deny that successful capitalism ultimately requires profits. Loss-making businesses are always in a race against time to achieve financial viability, but time is often the friend of a profitable business, especially if it is growing.
Check out our latest analysis for Harel Insurance Investments & Financial Services
Earnings per share of Harel Insurance Investments & Financial Services are growing.
The market is a short-term voting machine, but a long-term weighing machine, so stock price eventually follows earnings per share (EPS). This makes EPS growth an attractive quality for any business. Impressively, Harel Insurance Investments & Financial Services has grown EPS by 27% pa, compounded, over the past three years. If the company can sustain this type of growth, we expect shareholders to come out on top.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. I note that the income of Harel Insurance Investments & Financial Services operations was lower than its turnover over the last twelve months, which could distort my analysis of its margins. Harel Insurance Investments & Financial Services’ EBIT margins actually improved by 2.2 percentage points over the past year to 8.3%, but, on the other hand, revenues were down 13 %. It’s far from ideal.
In the table below, you can see how the company has increased its profits and revenue over time. Click on the table to see the exact numbers.
While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back strong. So check the strength of Harel Insurance Investments & Financial Services’ balance sheet, before you get too excited.
Are Harel Insurance Investments & Financial Services insiders aligned with all shareholders?
I always like to check CEO compensation, because I think reasonable compensation levels around or below the median can be a sign that shareholder interests are well taken care of. For companies with a market capitalization between ₪3.3 billion and ₪11 billion, such as Harel Insurance Investments & Financial Services, the median CEO salary is around ₪3.9 million.
The CEO of Harel Insurance Investments & Financial Services received £3.5million in compensation for the year that ended. That seems pretty reasonable, especially given that it’s below the median for companies of a similar size. CEO pay levels aren’t the most important metric for investors, but when pay is modest, it promotes better alignment between the CEO and ordinary shareholders. It can also be a sign of a culture of integrity, broadly defined.
Is Harel Insurance Investments & Financial Services Worth Watching?
You can’t deny that Harel Insurance Investments & Financial Services has grown its earnings per share at a very impressive rate. It’s attractive. The rapid growth bodes well while the CEO’s very reasonable salary aids build trust in the board. So I’d say it’s the kind of stock worth watching, even if it doesn’t have much value today. You should always take note of the risks, for example – Harel Insurance Investments & Financial Services has 1 warning sign we think you should know.
Of course, you can (sometimes) buy stocks that are not increased income and not have insiders buying stocks. But as a growth investor, I always like to check out companies that do have these characteristics. You can access a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading 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 only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.