We Ran A Stock Scan For Earnings Growth And Shenglong Splendecor International (HKG:8481) Passed With Ease

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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 Shenglong Splendecor International (HKG:8481). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Shenglong Splendecor International

How Quickly Is Shenglong Splendecor International Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shenglong Splendecor International's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 38%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Shenglong Splendecor International shareholders can take confidence from the fact that EBIT margins are up from 5.5% to 8.8%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

Shenglong Splendecor International isn't a huge company, given its market capitalisation of HK$117m. That makes it extra important to check on its balance sheet strength.

Are Shenglong Splendecor International Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Shenglong Splendecor International insiders own a meaningful share of the business. Indeed, with a collective holding of 72%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only HK$117m Shenglong Splendecor International is really small for a listed company. So this large proportion of shares owned by insiders only amounts to CN¥84m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is Shenglong Splendecor International Worth Keeping An Eye On?

Shenglong Splendecor International's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Shenglong Splendecor International for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for Shenglong Splendecor International you should be aware of, and 1 of them can't be ignored.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in HK with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.