Should You Be Adding eCargo Holdings (ASX:ECG) To Your Watchlist Today?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like eCargo Holdings (ASX:ECG). 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 eCargo Holdings

eCargo Holdings' Improving Profits

eCargo Holdings 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. Thus, it makes sense to focus on more recent growth rates, instead. In previous twelve months, eCargo Holdings' EPS has risen from HK$0.0077 to HK$0.0082. That's a fair increase of 7.2%.

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. EBIT margins for eCargo Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 50% to HK$188m. That's a real positive.

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.

Since eCargo Holdings is no giant, with a market capitalisation of AU$4.3m, you should definitely check its cash and debt before getting too excited about its prospects.

Are eCargo Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

A great takeaway for shareholders is that company insiders within eCargo Holdings have collectively spent HK$12k acquiring shares in the company. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. It is also worth noting that it was Independent Non-Executive Director Yuming Zou who made the biggest single purchase, worth AU$4.9k, paying AU$0.033 per share.

Does eCargo Holdings Deserve A Spot On Your Watchlist?

One positive for eCargo Holdings is that it is growing EPS. That's nice to see. Not every business can grow its EPS, but eCargo Holdings certainly can. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. We should say that we've discovered 4 warning signs for eCargo Holdings that you should be aware of before investing here.

The good news is that eCargo Holdings is not the only stock with insider buying. Here's a list of small cap, undervalued companies in AU with 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com