We Ran A Stock Scan For Earnings Growth And Chow Sang Sang Holdings International (HKG:116) Passed With Ease

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.' 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 Chow Sang Sang Holdings International (HKG:116). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Chow Sang Sang Holdings International's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Chow Sang Sang Holdings International's EPS has grown 20% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Chow Sang Sang Holdings International's EBIT margins have actually improved by 3.2 percentage points in the last year, to reach 7.9%, but, on the flip side, revenue was down 10%. While not disastrous, these figures could be better.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

See our latest analysis for Chow Sang Sang Holdings International

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Chow Sang Sang Holdings International's balance sheet strength, before getting too excited.

Are Chow Sang Sang Holdings International Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Chow Sang Sang Holdings International insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth HK$1.8b. Coming in at 20% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Is Chow Sang Sang Holdings International Worth Keeping An Eye On?

For growth investors, Chow Sang Sang Holdings International's raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. We don't want to rain on the parade too much, but we did also find 2 warning signs for Chow Sang Sang Holdings International (1 can't be ignored!) that you need to be mindful of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Hong Kong companies which have demonstrated growth backed by significant insider holdings.

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.