Here's Why We Think Yadea Group Holdings (HKG:1585) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Yadea Group Holdings (HKG:1585). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Yadea Group Holdings

How Quickly Is Yadea Group Holdings Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Yadea Group Holdings has achieved impressive annual EPS growth of 49%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Yadea Group Holdings maintained stable EBIT margins over the last year, all while growing revenue 19% to CN¥34b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 Yadea Group Holdings.

Are Yadea Group Holdings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

One gleaming positive for Yadea Group Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction Vice Chairwoman & CEO Jinghong Qian paid HK$8.4m, for stock at HK$13.70 per share. It doesn't get much better than that, in terms of large investments from insiders.

On top of the insider buying, we can also see that Yadea Group Holdings insiders own a large chunk of the company. In fact, they own 64% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. CN¥26b That means they have plenty of their own capital riding on the performance of the business!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Jinghong Qian is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Yadea Group Holdings, with market caps between CN¥29b and CN¥88b, is around CN¥7.3m.

The Yadea Group Holdings CEO received total compensation of just CN¥1.4m in the year to December 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Yadea Group Holdings Worth Keeping An Eye On?

Yadea Group Holdings' earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Yadea Group Holdings deserves timely attention. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Yadea Group Holdings is trading on a high P/E or a low P/E, relative to its industry.

The good news is that Yadea Group 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.