With EPS Growth And More, Alltronics Holdings (HKG:833) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.

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 Alltronics Holdings (HKG:833). 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 Alltronics Holdings

How Fast Is Alltronics Holdings Growing Its Earnings Per Share?

Over the last three years, Alltronics Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Alltronics Holdings' EPS shot up from HK$0.15 to HK$0.24; a result that's bound to keep shareholders happy. That's a commendable gain of 62%.

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. EBIT margins for Alltronics Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.6% to HK$1.7b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Alltronics Holdings is no giant, with a market capitalisation of HK$293m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Alltronics Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

With strong conviction, Alltronics Holdings insiders have stood united by refusing to sell shares over the last year. But more importantly, Founder & Executive Chairman Yin Kee Lam spent HK$514k acquiring shares, doing so at an average price of HK$0.57. Strong buying like that could be a sign of opportunity.

Does Alltronics Holdings Deserve A Spot On Your Watchlist?

For growth investors, Alltronics Holdings' raw rate of earnings growth is a beacon in the night. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. In essence, your time will not be wasted checking out Alltronics Holdings in more detail. We don't want to rain on the parade too much, but we did also find 2 warning signs for Alltronics Holdings that you need to be mindful of.

Keen growth investors love to see insider buying. Thankfully, Alltronics Holdings 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.