Here's Why We Think Prinx Chengshan Holdings (HKG:1809) Is Well Worth Watching

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Prinx Chengshan Holdings (HKG:1809). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Prinx Chengshan Holdings

How Quickly Is Prinx Chengshan Holdings Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Prinx Chengshan Holdings managed to grow EPS by 10% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Prinx Chengshan Holdings maintained stable EBIT margins over the last year, all while growing revenue 29% to CN¥7.2b. 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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Prinx Chengshan Holdings Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We note that Prinx Chengshan Holdings insiders spent CN¥1.1m on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was CFO & Executive Director Futao Shi who made the biggest single purchase, worth HK$534k, paying HK$6.51 per share.

Should You Add Prinx Chengshan Holdings To Your Watchlist?

As I already mentioned, Prinx Chengshan Holdings is a growing business, which is what I like to see. Not every business can grow its EPS, but Prinx Chengshan Holdings certainly can. The gravy on the mushroom pie is the insider buying, which has me tasting potential opportunity; one for the watchlist, I'd posit. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Prinx Chengshan Holdings (1 is potentially serious) you should be aware of.

As a growth investor I do like to see insider buying. But Prinx Chengshan Holdings isn't the only one. You can see a a free list of them here.

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.