Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Hannon Armstrong Sustainable Infrastructure Capital Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Hannon Armstrong Sustainable Infrastructure Capital has grown EPS by 36% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. I note that Hannon Armstrong Sustainable Infrastructure Capital's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Hannon Armstrong Sustainable Infrastructure Capital's EBIT margins were flat over the last year, revenue grew by a solid 32% to US$67m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Hannon Armstrong Sustainable Infrastructure Capital's future profits.
Are Hannon Armstrong Sustainable Infrastructure Capital Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Hannon Armstrong Sustainable Infrastructure Capital insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at US$72m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.
Is Hannon Armstrong Sustainable Infrastructure Capital Worth Keeping An Eye On?
For growth investors like me, Hannon Armstrong Sustainable Infrastructure Capital's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Now, you could try to make up your mind on Hannon Armstrong Sustainable Infrastructure Capital by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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