Here's Why We Think Chen Hsong Holdings (HKG:57) Is Well Worth Watching

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.'

So if you're like me, you might be more interested in profitable, growing companies, like Chen Hsong Holdings (HKG:57). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Chen Hsong Holdings

How Fast Is Chen Hsong Holdings Growing?

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. Chen Hsong Holdings managed to grow EPS by 11% per year, over three years. That's a good rate of growth, if it can be sustained.

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

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Chen Hsong Holdings is no giant, with a market capitalization of HK$1.7b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Chen Hsong Holdings Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Chen Hsong Holdings insiders have a significant amount of capital invested in the stock. To be specific, they have HK$126m 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.

Is Chen Hsong Holdings Worth Keeping An Eye On?

One important encouraging feature of Chen Hsong Holdings is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Still, you should learn about the 3 warning signs we've spotted with Chen Hsong Holdings .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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