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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like China State Construction Development Holdings (HKG:830). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.
How Fast Is China State Construction Development Holdings Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years China State Construction Development Holdings grew its EPS by 16% 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. It seems China State Construction Development Holdings is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
China State Construction Development Holdings isn't a huge company, given its market capitalization of HK$1.3b. That makes it extra important to check on its balance sheet strength.
Are China State Construction Development 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The good news for China State Construction Development Holdings shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Non-Executive Chairman Haipeng Zhang bought HK$379k worth of shares at an average price of around HK$0.56.
Does China State Construction Development Holdings Deserve A Spot On Your Watchlist?
One positive for China State Construction Development Holdings is that it is growing EPS. That's nice to see. Not every business can grow its EPS, but China State Construction Development Holdings certainly can. The icing on the cake is that an insider bought shares during the year, which inclines me to put this one on a watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for China State Construction Development Holdings (1 is significant!) that you need to be mindful of.
The good news is that China State Construction Development 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.
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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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