If EPS Growth Is Important To You, Hilton Worldwide Holdings (NYSE:HLT) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hilton Worldwide Holdings (NYSE:HLT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hilton Worldwide Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Hilton Worldwide Holdings
How Fast Is Hilton Worldwide Holdings 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 makes EPS growth an attractive quality for any company. Over the last three years, Hilton Worldwide Holdings has grown EPS by 7.4% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Our analysis has highlighted that Hilton Worldwide Holdings' 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. The music to the ears of Hilton Worldwide Holdings shareholders is that EBIT margins have grown from 39% to 56% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Hilton Worldwide Holdings' forecast profits?
Are Hilton Worldwide Holdings Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$36b company like Hilton Worldwide Holdings. 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. Notably, they have an enviable stake in the company, worth US$616m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Should You Add Hilton Worldwide Holdings To Your Watchlist?
One important encouraging feature of Hilton Worldwide Holdings is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. It is worth noting though that we have found 2 warning signs for Hilton Worldwide Holdings (1 makes us a bit uncomfortable!) that you need to take into consideration.
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 free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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