Is Now The Time To Put Legendary Education Group (HKG:8195) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Legendary Education Group (HKG:8195). 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.

View our latest analysis for Legendary Education Group

How Fast Is Legendary Education Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Legendary Education Group managed to grow EPS by 14% per year, over three years. That's a pretty good rate, if the company can sustain it.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the revenue front, Legendary Education Group has done well over the past year, growing revenue by 62% to HK$268m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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.

Legendary Education Group isn't a huge company, given its market capitalisation of HK$641m. That makes it extra important to check on its balance sheet strength.

Are Legendary Education Group Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Legendary Education Group insiders have a significant amount of capital invested in the stock. To be specific, they have HK$148m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 23% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Legendary Education Group Worth Keeping An Eye On?

As previously touched on, Legendary Education Group is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Still, you should learn about the 2 warning signs we've spotted with Legendary Education Group.

Although Legendary Education Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Hong Kong companies that not only boast of strong growth but have also seen recent insider 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. 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.