Should You Be Adding Huatai Securities (SHSE:601688) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Huatai Securities (SHSE:601688), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Huatai Securities

Huatai Securities' Earnings Per Share Are 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) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Huatai Securities managed to grow EPS by 5.3% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Huatai Securities' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Huatai Securities achieved similar EBIT margins to last year, revenue grew by a solid 25% to CN¥42b. That's a real positive.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Huatai Securities.

Are Huatai Securities Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥152b company like Huatai Securities. But we are reassured by the fact they have invested in the company. Indeed, they hold CN¥90m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.06% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Huatai Securities To Your Watchlist?

One important encouraging feature of Huatai Securities is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. What about risks? Every company has them, and we've spotted 1 warning sign for Huatai Securities you should know about.

Although Huatai Securities certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.