With EPS Growth And More, Xtep International Holdings (HKG:1368) Makes An Interesting Case

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Xtep International Holdings (HKG:1368). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Xtep International Holdings

How Fast Is Xtep International Holdings Growing?

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Xtep International Holdings managed to grow EPS by 8.7% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. Xtep International Holdings maintained stable EBIT margins over the last year, all while growing revenue 34% to CN¥12b. That's progress.

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.

Fortunately, we've got access to analyst forecasts of Xtep International Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Xtep International Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

The real kicker here is that Xtep International Holdings insiders spent a staggering CN¥40m on acquiring shares in just one year, without single share being sold in the meantime. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. We also note that it was the Founder, Shui Po Ding, who made the biggest single acquisition, paying HK$16m for shares at about HK$7.84 each.

Along with the insider buying, another encouraging sign for Xtep International Holdings is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at CN¥615m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Does Xtep International Holdings Deserve A Spot On Your Watchlist?

One positive for Xtep International Holdings is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. It is worth noting though that we have found 1 warning sign for Xtep International Holdings that you need to take into consideration.

The good news is that Xtep International Holdings is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.