With EPS Growth And More, 8I Holdings (ASX:8IH) Is Interesting

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. 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.

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. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for 8I Holdings

How Fast Is 8I Holdings Growing Its Earnings Per Share?

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 see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). 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. While 8I Holdings did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

8I Holdings isn't a huge company, given its market capitalization of AU$87m. That makes it extra important to check on its balance sheet strength.

Are 8I 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for 8I Holdings shareholders is that no insiders reported selling 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.

And the insider buying isn't the only sign of alignment between shareholders and the board, since 8I Holdings insiders own more than a third of the company. Actually, with 50% 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. With that sort of holding, insiders have about S$43m riding on the stock, at current prices. That's nothing to sneeze at!

Does 8I Holdings Deserve A Spot On Your Watchlist?

One positive for 8I Holdings is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with 8I Holdings (at least 1 which shouldn't be ignored) , and understanding them 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.