Stock Analysis

Does Hung Fook Tong Group Holdings (HKG:1446) Deserve A Spot On Your Watchlist?

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SEHK:1446
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Hung Fook Tong Group Holdings (HKG:1446). 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Hung Fook Tong Group Holdings

How Fast Is Hung Fook Tong Group 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 a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Hung Fook Tong Group Holdings grew its EPS from HK$0.015 to HK$0.095, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

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. Unfortunately, Hung Fook Tong Group Holdings's revenue dropped 9.4% last year, but the silver lining is that EBIT margins improved from 2.6% to 9.4%. That falls short of ideal.

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.

earnings-and-revenue-history
SEHK:1446 Earnings and Revenue History May 11th 2021

Since Hung Fook Tong Group Holdings is no giant, with a market capitalization of HK$361m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Hung Fook Tong Group Holdings Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Hung Fook Tong Group Holdings shares, in the last year. So it's definitely nice that CEO & Executive Director Wing Fu Szeto bought HK$351k worth of shares at an average price of around HK$0.35.

On top of the insider buying, we can also see that Hung Fook Tong Group Holdings insiders own a large chunk of the company. Indeed, with a collective holding of 51%, company insiders are in control and have plenty of capital behind the venture. 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$183m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Hung Fook Tong Group Holdings Worth Keeping An Eye On?

Hung Fook Tong Group Holdings's earnings have taken off like any random crypto-currency did, back in 2017. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Hung Fook Tong Group Holdings belongs on the top of your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Hung Fook Tong Group Holdings that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hung Fook Tong Group 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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