Is Now The Time To Put Lever Style (HKG:1346) 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.' 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.

In contrast to all that, many investors prefer to focus on companies like Lever Style (HKG:1346), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lever Style with the means to add long-term value to shareholders.

View our latest analysis for Lever Style

How Quickly Is Lever Style Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Lever Style has managed to grow EPS by 33% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. The music to the ears of Lever Style shareholders is that EBIT margins have grown from 3.9% to 9.0% in the last 12 months and revenues are on an upwards trend as well. 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. To see the actual numbers, click on the chart.

Since Lever Style is no giant, with a market capitalisation of HK$479m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Lever Style Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Our analysis into Lever Style has shown that insiders have sold US$1.5m worth of shares over the last 12 months. But this is outweighed by the trades from Executive Chairman Chi Yan Szeto who spent US$2.7m buying shares, at an average price of around US$0.71. And that's a reason to be optimistic.

Does Lever Style Deserve A Spot On Your Watchlist?

You can't deny that Lever Style has grown its earnings per share at a very impressive rate. That's attractive. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. So on this analysis, Lever Style is probably worth spending some time on. You should always think about risks though. Case in point, we've spotted 3 warning signs for Lever Style you should be aware of, and 1 of them can't be ignored.

Keen growth investors love to see insider buying. Thankfully, Lever Style isn't the only one. You can see a a free list of them here.

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.