Here's Why I Think HiTech Group Australia (ASX:HIT) Is An Interesting Stock

By
Simply Wall St
Published
January 21, 2022
ASX:HIT
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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 HiTech Group Australia (ASX:HIT). 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.

Check out our latest analysis for HiTech Group Australia

How Fast Is HiTech Group Australia Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years HiTech Group Australia grew its EPS by 9.4% per year. That's a good rate of growth, if it can be sustained.

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. HiTech Group Australia maintained stable EBIT margins over the last year, all while growing revenue 26% to AU$42m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
ASX:HIT Earnings and Revenue History January 21st 2022

Since HiTech Group Australia is no giant, with a market capitalization of AU$83m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are HiTech Group Australia Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that HiTech Group Australia insiders own a meaningful share of the business. Indeed, with a collective holding of 75%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about AU$62m riding on the stock, at current prices. That's nothing to sneeze at!

Is HiTech Group Australia Worth Keeping An Eye On?

One important encouraging feature of HiTech Group Australia is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Before you take the next step you should know about the 3 warning signs for HiTech Group Australia that we have uncovered.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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