With EPS Growth And More, Times Neighborhood Holdings (HKG:9928) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Times Neighborhood Holdings (HKG:9928). 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.

Check out our latest analysis for Times Neighborhood Holdings

Times Neighborhood Holdings'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. Like a wedge-tailed eagle on the wind, Times Neighborhood Holdings's EPS soared from CN¥0.10 to CN¥0.17, in just one year. That's a impressive gain of 59%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Times Neighborhood Holdings shareholders can take confidence from the fact that EBIT margins are up from 14% to 17%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Times Neighborhood Holdings.

Are Times Neighborhood Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's a pleasure to note that insiders spent CN¥13m buying Times Neighborhood Holdings shares, over the last year, without reporting any share sales whatsoever. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. It is also worth noting that it was Chairman of the Board Xihong Bai who made the biggest single purchase, worth HK$6.1m, paying HK$12.24 per share.

On top of the insider buying, it's good to see that Times Neighborhood Holdings insiders have a valuable investment in the business. Indeed, they hold CN¥176m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 2.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Meng Wang, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Times Neighborhood Holdings with market caps between CN¥2.6b and CN¥10b is about CN¥3.0m.

Times Neighborhood Holdings offered total compensation worth CN¥1.7m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Times Neighborhood Holdings Worth Keeping An Eye On?

For growth investors like me, Times Neighborhood Holdings's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Times Neighborhood Holdings 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 Times Neighborhood Holdings, you'll probably love this free list of growing companies that insiders are buying.

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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