Here's Why We Think Huitongda Network (HKG:9878) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Huitongda Network (HKG:9878). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Huitongda Network with the means to add long-term value to shareholders.

Check out our latest analysis for Huitongda Network

Huitongda Network's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Commendations have to be given in seeing that Huitongda Network grew its EPS from CN¥0.10 to CN¥0.75, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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. EBIT margins for Huitongda Network remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.6% to CN¥83b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Huitongda Network's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Huitongda Network Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Huitongda Network insiders own a significant number of shares certainly is appealing. In fact, they own 46% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. And their holding is extremely valuable at the current share price, totalling CN¥8.4b. That means they have plenty of their own capital riding on the performance of the business!

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Huitongda Network with market caps between CN¥7.3b and CN¥23b is about CN¥3.3m.

Huitongda Network offered total compensation worth CN¥2.8m to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Huitongda Network Worth Keeping An Eye On?

Huitongda Network's earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that Huitongda Network is worth considering carefully. However, before you get too excited we've discovered 1 warning sign for Huitongda Network that you should be aware of.

The beauty of investing is that you can invest in almost 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. 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.