We Ran A Stock Scan For Earnings Growth And Hidili Industry International Development (HKG:1393) Passed With Ease

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Hidili Industry International Development (HKG:1393), which has not only revenues, but also profits. 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 Hidili Industry International Development

How Fast Is Hidili Industry International Development Growing Its Earnings Per Share?

Over the last three years, Hidili Industry International Development 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. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Hidili Industry International Development's EPS shot from CN¥0.071 to CN¥0.18, over the last year. It's not often a company can achieve year-on-year growth of 150%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. While Hidili Industry International Development did well to grow revenue over the last year, EBIT margins were dampened at the same time. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since Hidili Industry International Development is no giant, with a market capitalisation of HK$2.1b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Hidili Industry International Development 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 Hidili Industry International Development insiders have a significant amount of capital invested in the stock. Holding CN¥504m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That holding amounts to 24% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Hidili Industry International Development, with market caps between CN¥688m and CN¥2.8b, is around CN¥2.1m.

The Hidili Industry International Development CEO received total compensation of only CN¥352k in the year to December 2021. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Hidili Industry International Development To Your Watchlist?

Hidili Industry International Development's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Hidili Industry International Development certainly ticks a few boxes, so we think it's probably well worth further consideration. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Hidili Industry International Development (2 are a bit unpleasant) you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.