Here's Why I Think Harris Technology Group (ASX:HT8) Is An Interesting Stock
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
In contrast to all that, I prefer to spend time on companies like Harris Technology Group (ASX:HT8), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Check out our latest analysis for Harris Technology Group
How Fast Is Harris Technology Group Growing Its Earnings Per Share?
Over the last three years, Harris Technology Group has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Harris Technology Group boosted its trailing twelve month EPS from AU$0.0053 to AU$0.0059, in the last year. I doubt many would complain about that 11% gain.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Harris Technology Group is growing revenues, and EBIT margins improved by 2.6 percentage points to 12%, over the last year. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
Harris Technology Group isn't a huge company, given its market capitalization of AU$34m. That makes it extra important to check on its balance sheet strength.
Are Harris Technology Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Any way you look at it Harris Technology Group shareholders can gain quiet confidence from the fact that insiders shelled out AU$708k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. We also note that it was the CEO, MD & Executive Director, Garrison Huang, who made the biggest single acquisition, paying AU$133k for shares at about AU$0.11 each.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Harris Technology Group insiders own more than a third of the company. In fact, they own 37% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only AU$34m Harris Technology Group is really small for a listed company. That means insiders only have AU$13m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Garrison Huang is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under AU$275m, like Harris Technology Group, the median CEO pay is around AU$391k.
The Harris Technology Group CEO received total compensation of just AU$91k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is Harris Technology Group Worth Keeping An Eye On?
One positive for Harris Technology Group is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. Before you take the next step you should know about the 4 warning signs for Harris Technology Group (1 is potentially serious!) that we have uncovered.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Harris Technology Group, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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