Is Now The Time To Put HM International Holdings (HKG:8416) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like HM International Holdings (HKG:8416). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide HM International Holdings with the means to add long-term value to shareholders.

Check out our latest analysis for HM International Holdings

How Fast Is HM International Holdings Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. HM International Holdings managed to grow EPS by 6.4% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While HM International Holdings may have maintained EBIT margins over the last year, revenue has fallen. While this may raise concerns, investors should investigate the reasoning behind this.

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.

Since HM International Holdings is no giant, with a market capitalisation of HK$43m, you should definitely check its cash and debt before getting too excited about its prospects.

Are HM International Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling HM International Holdings shares, in the last year. Add in the fact that Wai Chung Chan, the COO & Executive Director of the company, paid HK$162k for shares at around HK$0.12 each. It seems that at least one insider is prepared to show the market there is potential within HM International Holdings.

It's reassuring that HM International Holdings insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations under HK$1.6b, like HM International Holdings, the median CEO pay is around HK$1.8m.

HM International Holdings' CEO took home a total compensation package worth HK$1.4m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, 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 HM International Holdings Worth Keeping An Eye On?

One important encouraging feature of HM International Holdings is that it is growing profits. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. The sum of all that, points to a quality business, and a genuine prospect for further research. We don't want to rain on the parade too much, but we did also find 3 warning signs for HM International Holdings (1 can't be ignored!) that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of HM International Holdings, you'll probably love this curated collection of companies in HK that have an attractive valuation alongside 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.