Is Now The Time To Put Smiths Group (LON:SMIN) On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Smiths Group (LON:SMIN), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
How Fast Is Smiths Group Growing Its Earnings Per Share?
Smiths Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Smiths Group's EPS skyrocketed from UK£0.64 to UK£0.84, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 32%.
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. While we note Smiths Group achieved similar EBIT margins to last year, revenue grew by a solid 4.9% to UK£2.9b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Check out our latest analysis for Smiths Group
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Smiths Group's forecast profits?
Are Smiths Group 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Any way you look at it Smiths Group shareholders can gain quiet confidence from the fact that insiders shelled out UK£558k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. Zooming in, we can see that the biggest insider purchase was by Independent Non Executive Chairman Steven Williams for UK£338k worth of shares, at about UK£16.88 per share.
It's reassuring that Smiths Group insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations over UK£6.0b, like Smiths Group, the median CEO pay is around UK£5.0m.
The Smiths Group CEO received UK£4.4m in compensation for the year ending July 2025. That is actually below the median for CEO's of similarly 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. It can also be a sign of a culture of integrity, in a broader sense.
Is Smiths Group Worth Keeping An Eye On?
For growth investors, Smiths Group's raw rate of earnings growth is a beacon in the night. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The overriding message from this quick rundown is yes, this stock is worth investigating further. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Smiths Group.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Smiths Group, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside insider buying in the last three months.
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.