I Ran A Stock Scan For Earnings Growth And Anxian Yuan China Holdings (HKG:922) Passed With Ease

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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Anxian Yuan China Holdings (HKG:922), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Anxian Yuan China Holdings

How Fast Is Anxian Yuan China Holdings Growing Its Earnings Per Share?

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Anxian Yuan China Holdings grew its EPS from HK$0.02 to HK$0.066, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Anxian Yuan China Holdings shareholders can take confidence from the fact that EBIT margins are up from 14% to 32%, and revenue is growing. That's great to see, on both counts.

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 Anxian Yuan China Holdings is no giant, with a market capitalization of HK$314m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Anxian Yuan China Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold -HK$5.1m worth of shares. But that's far less than the HK$123m insiders spend purchasing stock. This makes me even more interested in Anxian Yuan China Holdings because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by Executive Chairman Hua Shi for HK$110m worth of shares, at about HK$0.10 per share.

On top of the insider buying, we can also see that Anxian Yuan China Holdings insiders own a large chunk of the company. In fact, they own 69% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about HK$217m riding on the stock, at current prices. That's nothing to sneeze at!

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Jun Shi, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Anxian Yuan China Holdings with market caps under HK$1.6b is about HK$1.8m.

Anxian Yuan China Holdings offered total compensation worth HK$1.1m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Anxian Yuan China Holdings Worth Keeping An Eye On?

Anxian Yuan China Holdings's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Anxian Yuan China Holdings deserves timely attention. What about risks? Every company has them, and we've spotted 3 warning signs for Anxian Yuan China Holdings (of which 1 can't be ignored!) you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Anxian Yuan China Holdings, you'll probably love this free list of growing companies that insiders are 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. 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.
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