Does Chen Hsong Holdings (HKG:57) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Chen Hsong Holdings (HKG:57). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Chen Hsong Holdings

How Quickly Is Chen Hsong Holdings Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Over the last three years, Chen Hsong Holdings has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

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. While we note Chen Hsong Holdings's EBIT margins were flat over the last year, revenue grew by a solid 15% to HK$1.8b. That's progress.

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.

Chen Hsong Holdings isn't a huge company, given its market capitalization of HK$1.5b. That makes it extra important to check on its balance sheet strength.

Are Chen Hsong Holdings Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

For the sake of balance, I do note Chen Hsong Holdings insiders sold -HK$124k worth of shares last year. But this is outweighed by the Independent Non-Executive Director Anish Lalvani who spent HK$1.0m buying shares, at an average price of around around HK$2.39.

On top of the insider buying, it's good to see that Chen Hsong Holdings insiders have a valuable investment in the business. To be specific, they have HK$117m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 7.7% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Chen Hsong Holdings Deserve A Spot On Your Watchlist?

One positive for Chen Hsong Holdings is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. You still need to take note of risks, for example - Chen Hsong Holdings has 2 warning signs we think you should be aware of.

The good news is that Chen Hsong Holdings 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.

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.