I Built A List Of Growing Companies And Lonking Holdings (HKG:3339) Made The Cut

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Lonking Holdings (HKG:3339). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Lonking Holdings

How Quickly Is Lonking Holdings Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Lonking Holdings has grown EPS by 23% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Lonking Holdings's EBIT margins were flat over the last year, revenue grew by a solid 9.7% to CN¥13b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Lonking Holdings EPS 100% free.

Are Lonking Holdings Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Lonking Holdings insiders own a meaningful share of the business. In fact, they own 56% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. And their holding is extremely valuable at the current share price, totalling CN¥6.6b. Now that's what I call some serious skin in the game!

Does Lonking Holdings Deserve A Spot On Your Watchlist?

You can't deny that Lonking Holdings has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Lonking Holdings (at least 2 which can't be ignored) , and understanding them should be part of your investment process.

Although Lonking Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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