Hillman (HLMN)

Hardware products and merchandising solutions provider Hillman (NASDAQ:HLMN) met Wall Streets revenue expectations in Q3 CY2025, with sales up 8% year on year to $424.9 million. On the other hand, the company’s full-year revenue guidance of $1.56 billion at the midpoint came in 0.6% below analysts’ estimates. Its non-GAAP profit of $0.22 per share was 7.6% above analysts’ consensus estimates.

Company Overview

Established when Max Hillman purchased a franchise operation, Hillman (NASDAQ:HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Fortune Brands Home & Security (NYSE:FBHS), Stanley Black & Decker (NYSE:SWK), and Spectrum Brands (NYSE:SPB).

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Hillman’s sales grew at a sluggish 3% compounded annual growth rate over the last five years. This fell short of our benchmarks and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Hillman’s recent performance shows its demand has slowed as its annualized revenue growth of 1.9% over the last two years was below its five-year trend.

This quarter, Hillman grew its revenue by 8% year on year, and its $424.9 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 8.4% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates its newer products and services will catalyze better top-line performance.

Hillman has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 44.9% gross margin over the last five years. That means Hillman only paid its suppliers $55.09 for every $100 in revenue.

This quarter, Hillman’s gross profit margin was 51.7%, marking a 3.5 percentage point increase from 48.2% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Hillman was profitable over the last five years but held back by its large cost base. Its average operating margin of 4% was weak for an industrials business. This result is surprising given its high gross margin as a starting point.

On the plus side, Hillman’s operating margin rose by 6.4 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Hillman generated an operating margin profit margin of 10.8%, up 4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Hillman’s EPS grew at an astounding 85.2% compounded annual growth rate over the last five years, higher than its 3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Hillman’s earnings to better understand the drivers of its performance. As we mentioned earlier, Hillman’s operating margin expanded by 6.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Hillman, its two-year annual EPS growth of 29.8% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Hillman reported adjusted EPS of $0.22, up from $0.16 in the same quarter last year. This print beat analysts’ estimates by 7.6%. Over the next 12 months, Wall Street expects Hillman’s full-year EPS of $0.59 to shrink by 4.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hillman has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.5%, lousy for an industrials business.

Taking a step back, an encouraging sign is that Hillman’s margin expanded by 12.2 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Hillman’s free cash flow clocked in at $9.07 million in Q3, equivalent to a 2.1% margin. The company’s cash profitability regressed as it was 7.9 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Hillman historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.5%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Hillman’s ROIC increased by 3.2 percentage points annually over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Hillman reported $37.73 million of cash and $784.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $274 million of EBITDA over the last 12 months, we view Hillman’s 2.7× net-debt-to-EBITDA ratio as safe. We also see its $28.59 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked how Hillman beat analysts’ EBITDA and EPS expectations this quarter. On the other hand, its full-year revenue guidance slightly missed. Overall, this print was mixed. The market seemed to be hoping for more, and the stock traded down 1.4% to $9.17 immediately following the results.

Updated: December 4, 2025 at 10:16 PM EST

When considering an investment in Hillman, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Hillman isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was weak over the last five years. And while its rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its projected EPS for the next year is lacking.

Hillman’s P/E ratio based on the next 12 months is 16.1x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $12.21 on the company (compared to the current share price of $9.01).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.