Should You Be Adding Pujiang International Group (HKG:2060) To Your Watchlist Today?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

In contrast to all that, I prefer to spend time on companies like Pujiang International Group (HKG:2060), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Pujiang International Group

How Fast Is Pujiang International Group Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Like a falcon taking flight, Pujiang International Group's EPS soared from CN¥0.14 to CN¥0.19, over the last year. That's a commendable gain of 34%.

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. While we note Pujiang International Group's EBIT margins were flat over the last year, revenue grew by a solid 7.4% to CN¥1.9b. That's progress.

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 it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Pujiang International Group's balance sheet strength, before getting too excited.

Are Pujiang International Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

One shining light for Pujiang International Group is the serious outlay one insider has made to buy shares, in the last year. In one fell swoop, Executive Chairman of the Board Liang Tang, spent HK$13m, at a price of HK$2.64 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 Pujiang International Group insiders own a large chunk of the company. Indeed, with a collective holding of 68%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. At the current share price, that insider holding is worth a whopping CN¥1.9b. That means they have plenty of their own capital riding on the performance of the business!

Does Pujiang International Group Deserve A Spot On Your Watchlist?

You can't deny that Pujiang International Group has grown its earnings per share at a very impressive rate. That's attractive. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Pujiang International Group , and understanding it should be part of your investment process.

The good news is that Pujiang International Group 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. 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.
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