Does Build King Holdings (HKG:240) Deserve A Spot On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Build King Holdings (HKG:240). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Build King Holdings

How Quickly Is Build King Holdings Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Build King Holdings grew its EPS by 4.2% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Build King Holdings maintained stable EBIT margins over the last year, all while growing revenue 11% to HK$8.6b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Build King Holdings isn't a huge company, given its market capitalization of HK$1.1b. That makes it extra important to check on its balance sheet strength.

Are Build King Holdings Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The first bit of good news is that no Build King Holdings insiders reported share sales in the last twelve months. Even better, though, is that the Chairman, Wei Peu Zen, bought a whopping HK$3.7m worth of shares, paying about HK$0.98 per share, on average. Big buys like that give me a sense of opportunity; actions speak louder than words.

On top of the insider buying, it's good to see that Build King Holdings insiders have a valuable investment in the business. To be specific, they have HK$115m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 10% of the company; visible skin in the game.

Does Build King Holdings Deserve A Spot On Your Watchlist?

As I already mentioned, Build King Holdings is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Build King Holdings that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Build King Holdings, you'll probably love this free list of growing companies that insiders are buying.

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.
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