Is Now The Time To Put Hiscox (LON:HSX) On Your Watchlist?
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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Hiscox (LON:HSX). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Hiscox
How Fast Is Hiscox Growing Its Earnings Per Share?
Over the last three years, Hiscox has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Hiscox's EPS shot from US$0.30 to US$0.74, over the last year. Year on year growth of 145% is certainly a sight to behold.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Hiscox shareholders is that EBIT margins have grown from 3.1% to 12% 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. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Hiscox's future EPS 100% free.
Are Hiscox Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's good to see Hiscox insiders walking the walk, by spending US$361k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was Group CEO & Executive Director Hamayou Hussain who made the biggest single purchase, worth UK£151k, paying UK£10.04 per share.
The good news, alongside the insider buying, for Hiscox bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$20m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.5%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to 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, Aki Hussain is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Hiscox, with market caps between US$4.0b and US$12b, is around US$3.2m.
Hiscox's CEO took home a total compensation package worth US$1.7m in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Hiscox Deserve A Spot On Your Watchlist?
Hiscox's earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Hiscox deserves timely attention. However, before you get too excited we've discovered 1 warning sign for Hiscox that you should be aware of.
Keen growth investors love to see insider buying. Thankfully, Hiscox isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by recent insider buying.
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.
