Here's Why Yadea Group Holdings (HKG:1585) Has Caught The Eye Of Investors

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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Yadea Group Holdings (HKG:1585). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Yadea Group Holdings with the means to add long-term value to shareholders.

View our latest analysis for Yadea Group Holdings

How Quickly Is Yadea Group Holdings Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Yadea Group Holdings has achieved impressive annual EPS growth of 60%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Yadea Group Holdings maintained stable EBIT margins over the last year, all while growing revenue 18% to CN¥29b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Yadea Group Holdings?

Are Yadea Group Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, 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.

The good news for Yadea Group Holdings is that one insider has illustrated their belief in the company's future with a huge purchase of shares in the last 12 months. Specifically, in one large transaction Vice Chairwoman & CEO Jinghong Qian paid HK$26m, for stock at HK$11.07 per share. Seeing such high conviction in the company is a huge positive for shareholders and should instil confidence in their mission.

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 65% 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. at the current share price. This is an incredible endorsement from them.

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. That's because Yadea Group Holdings' CEO, Jinghong Qian, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Yadea Group Holdings with market caps between CN¥27b and CN¥81b is about CN¥5.4m.

The Yadea Group Holdings CEO received total compensation of just CN¥1.1m in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Yadea Group Holdings Deserve A Spot On Your Watchlist?

Yadea Group Holdings' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. 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. You still need to take note of risks, for example - Yadea Group Holdings has 1 warning sign we think you should be aware of.

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.