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.
So if you’re like me, you might be more interested in profitable, growing companies, like Bosideng International Holdings (HKG:3998). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Bosideng International Holdings’s Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It’s no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Bosideng International Holdings has grown EPS by 39% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
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. While we note Bosideng International Holdings’s EBIT margins were flat over the last year, revenue grew by a solid 17% to CN¥12b. 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.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Bosideng International Holdings?
Are Bosideng International Holdings Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
For the sake of balance, I do note Bosideng International Holdings insiders sold -CN¥9.1m worth of shares last year. But this is outweighed by the Senior VP & Executive Director Jinsong Rui who spent CN¥10m buying shares, at an average price of around around CN¥3.83.
On top of the insider buying, we can also see that Bosideng International Holdings insiders own a large chunk of the company. In fact, they own 65% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term – something I like to see. At the current share price, that insider holding is worth a whopping CN¥15b. That means they have plenty of their own capital riding on the performance of the business!
Is Bosideng International Holdings Worth Keeping An Eye On?
Bosideng International Holdings’s earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Bosideng International Holdings deserves timely attention. Even so, be aware that Bosideng International Holdings is showing 1 warning sign in our investment analysis , you should know about…
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bosideng International Holdings, 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.
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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. 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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