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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like 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.
Hannon Armstrong Sustainable Infrastructure Capital's Improving Profits
Over the last three years, Hannon Armstrong Sustainable Infrastructure Capital 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. Like a firecracker arcing through the night sky, Hannon Armstrong Sustainable Infrastructure Capital's EPS shot from US$0.40 to US$0.99, over the last year. Year on year growth of 147% is certainly a sight to behold.
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. 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 76% to US$69m. That's a real positive.
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.
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?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Hannon Armstrong Sustainable Infrastructure Capital insiders have a significant amount of capital invested in the stock. With a whopping US$61m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.
Is Hannon Armstrong Sustainable Infrastructure Capital Worth Keeping An Eye On?
Hannon Armstrong Sustainable Infrastructure Capital's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Hannon Armstrong Sustainable Infrastructure Capital for a spot on your watchlist. 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.
Although Hannon Armstrong Sustainable Infrastructure Capital certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.