Does 8I Holdings (ASX:8IH) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like 8I Holdings (ASX:8IH), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for 8I Holdings

8I Holdings's Improving Profits

In the last three years 8I Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. It's good to see that 8I Holdings's EPS have grown from S$0.011 to S$0.013 over twelve months. I doubt many would complain about that 14% gain.

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. I note that 8I Holdings's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. On the one hand, 8I Holdings's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since 8I Holdings is no giant, with a market capitalization of AU$47m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are 8I Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling 8I Holdings shares, in the last year. With that in mind, it's heartening that Yiowmin Chay, the Non-Executive Director of the company, paid S$20k for shares at around S$0.26 each.

On top of the insider buying, we can also see that 8I Holdings insiders own a large chunk of the company. Actually, with 49% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have S$23m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is 8I Holdings Worth Keeping An Eye On?

One positive for 8I Holdings is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with 8I Holdings (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process.

The good news is that 8I Holdings is not the only growth stock with insider buying. Here's a list of them... 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.