Here's Why We Think Hla Group (SHSE:600398) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Hla Group (SHSE:600398), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Hla Group

How Fast Is Hla Group 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Hla Group grew its EPS by 5.7% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Our analysis has highlighted that Hla Group's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Hla Group achieved similar EBIT margins to last year, revenue grew by a solid 16% to CN¥22b. That's progress.

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.

Fortunately, we've got access to analyst forecasts of Hla Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Hla Group Insiders Aligned With All Shareholders?

Since Hla Group has a market capitalisation of CN¥45b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥11b. Coming in at 24% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Does Hla Group Deserve A Spot On Your Watchlist?

As previously touched on, Hla Group is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Hla Group you should be aware of.

Although Hla Group 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.

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