The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.
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 Hartford Insurance Group (NYSE:HIG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Hartford Insurance Group's Earnings Per Share Are Growing
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Hartford Insurance Group grew its EPS by 12% per year. That's a good rate of growth, if it can be sustained.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Hartford Insurance Group's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Hartford Insurance Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.5% to US$27b. That's progress.
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.
See our latest analysis for Hartford Insurance Group
Fortunately, we've got access to analyst forecasts of Hartford Insurance 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 Hartford Insurance Group Insiders Aligned With All Shareholders?
Since Hartford Insurance Group has a market capitalisation of US$35b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$159m. We note that this amounts to 0.4% of the company, which may be small owing to the sheer size of Hartford Insurance Group but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.
Does Hartford Insurance Group Deserve A Spot On Your Watchlist?
As previously touched on, Hartford Insurance Group is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. We should say that we've discovered 1 warning sign for Hartford Insurance Group that you should be aware of before investing here.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.
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.