With EPS Growth And More, Lisi Group (Holdings) (HKG:526) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Lisi Group (Holdings) (HKG:526). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lisi Group (Holdings) with the means to add long-term value to shareholders.

View our latest analysis for Lisi Group (Holdings)

How Fast Is Lisi Group (Holdings) Growing Its Earnings Per Share?

In the last three years Lisi Group (Holdings)'s earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Lisi Group (Holdings)'s EPS grew from CN¥0.029 to CN¥0.049, over the previous 12 months. It's a rarity to see 67% year-on-year growth like that.

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. Lisi Group (Holdings) maintained stable EBIT margins over the last year, all while growing revenue 3.7% to CN¥2.5b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Lisi Group (Holdings) isn't a huge company, given its market capitalisation of HK$499m. That makes it extra important to check on its balance sheet strength.

Are Lisi Group (Holdings) Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Lisi Group (Holdings) insiders have a significant amount of capital invested in the stock. Indeed, they hold CN¥156m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 31% of the company; visible skin in the game.

Does Lisi Group (Holdings) Deserve A Spot On Your Watchlist?

Lisi Group (Holdings)'s earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Lisi Group (Holdings) for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for Lisi Group (Holdings) (2 don't sit too well with us!) that you need to be mindful of.

Although Lisi Group (Holdings) certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Hong Kong companies that not only boast of strong growth but have strong insider backing.

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.