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

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shenglong Splendecor International (HKG:8481). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shenglong Splendecor International with the means to add long-term value to shareholders.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Shenglong Splendecor International's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Shenglong Splendecor International has grown EPS by 60% per year, over the last three years. 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 7.7% to 12%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

See our latest analysis for Shenglong Splendecor International

Since Shenglong Splendecor International is no giant, with a market capitalisation of HK$222m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Shenglong Splendecor International 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 we're pleased to report that Shenglong Splendecor International insiders own a meaningful share of the business. In fact, they own 76% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about CN¥168m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Shenglong Splendecor International Worth Keeping An Eye On?

Shenglong Splendecor International's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Shenglong Splendecor International very closely. It is worth noting though that we have found 5 warning signs for Shenglong Splendecor International (3 are a bit concerning!) that you need to take into consideration.

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.