Here's Why We Think AP Rentals Holdings (HKG:1496) Might Deserve Your Attention 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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 AP Rentals Holdings (HKG:1496). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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AP Rentals Holdings' Improving Profits

AP Rentals Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. It's good to see that AP Rentals Holdings' EPS has grown from HK$0.013 to HK$0.015 over twelve months. This amounts to a 15% gain; a figure that shareholders will be pleased to see.

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. The previous 12 months are something that AP Rentals Holdings will want to put behind them after seeing a drop in EBIT margin and revenue for the period. This is less than stellar for the company.

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.

See our latest analysis for AP Rentals Holdings

Since AP Rentals Holdings is no giant, with a market capitalisation of HK$138m, you should definitely check its cash and debt before getting too excited about its prospects.

Are AP Rentals Holdings Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that AP Rentals Holdings insiders own a meaningful share of the business. To be exact, company insiders hold 75% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Although, with AP Rentals Holdings being valued at HK$138m, this is a small company we're talking about. So despite a large proportional holding, insiders only have HK$104m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is AP Rentals Holdings Worth Keeping An Eye On?

One positive for AP Rentals Holdings is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Before you take the next step you should know about the 3 warning signs for AP Rentals Holdings that we have uncovered.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in HK with promising growth potential and insider confidence.

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.