Should You Be Adding Theme International Holdings (HKG:990) To Your Watchlist Today?

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 Theme International Holdings (HKG:990). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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 Theme International Holdings

Theme International Holdings's Improving Profits

In the last three years Theme International Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Over twelve months, Theme International Holdings increased its EPS from HK$0.014 to HK$0.015. That amounts to a small improvement of 8.4%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Theme International Holdings maintained stable EBIT margins over the last year, all while growing revenue 226% to HK$17b. That's progress.

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.

Since Theme International Holdings is no giant, with a market capitalization of HK$1.5b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Theme International Holdings Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalizations between HK$775m and HK$3.1b, like Theme International Holdings, the median CEO pay is around HK$2.3m.

The CEO of Theme International Holdings only received HK$671k in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Theme International Holdings Worth Keeping An Eye On?

As I already mentioned, Theme International Holdings is a growing business, which is what I like to see. On top of that, my faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So I do think the stock deserves further research, if not instant addition to your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Theme International Holdings that you should be aware of.

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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