Here's Why I Think Victory Securities (Holdings) (HKG:8540) Is An Interesting Stock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Victory Securities (Holdings) (HKG:8540). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Victory Securities (Holdings)

How Fast Is Victory Securities (Holdings) Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Victory Securities (Holdings) managed to grow EPS by 6.2% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. I note that Victory Securities (Holdings)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Victory Securities (Holdings) maintained stable EBIT margins over the last year, all while growing revenue 63% to HK$96m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since Victory Securities (Holdings) is no giant, with a market capitalization of HK$428m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Victory Securities (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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's good to see Victory Securities (Holdings) insiders walking the walk, by spending HK$5.4m on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by CEO & Executive Director Kuen Kou for HK$2.9m worth of shares, at about HK$1.26 per share.

Should You Add Victory Securities (Holdings) To Your Watchlist?

One important encouraging feature of Victory Securities (Holdings) is that it is growing profits. While some companies are struggling to grow EPS, Victory Securities (Holdings) seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. You still need to take note of risks, for example - Victory Securities (Holdings) has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Victory Securities (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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