Here's Why We Think Yee Hop Holdings (HKG:1662) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

In contrast to all that, many investors prefer to focus on companies like Yee Hop Holdings (HKG:1662), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Fast Is Yee Hop Holdings Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. In impressive fashion, Yee Hop Holdings' EPS grew from HK$0.044 to HK$0.077, over the previous 12 months. It's a rarity to see 75% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Yee Hop Holdings maintained stable EBIT margins over the last year, all while growing revenue 33% to HK$1.1b. 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.

View our latest analysis for Yee Hop Holdings

Yee Hop Holdings isn't a huge company, given its market capitalisation of HK$1.4b. That makes it extra important to check on its balance sheet strength.

Are Yee Hop Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, Executive Chairman of the Board Yin Kwan Jim spent HK$998k acquiring shares, doing so at an average price of HK$3.33. Purchases like this clue us in to the to the faith management has in the business' future.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Yee Hop Holdings insiders own more than a third of the company. To be exact, company insiders hold 68% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have HK$937m invested in the business, at the current share price. So there's plenty there to keep them focused!

Is Yee Hop Holdings Worth Keeping An Eye On?

Yee Hop 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. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Yee Hop Holdings belongs near the top of your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for Yee Hop Holdings you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Yee Hop Holdings, you'll probably love this curated collection of companies in HK that have an attractive valuation alongside 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.