Is Now The Time To Put Nissin Foods (HKG:1475) On Your Watchlist?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Nissin Foods (HKG:1475), 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.

Check out our latest analysis for Nissin Foods

How Fast Is Nissin Foods 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. As a tree reaches steadily for the sky, Nissin Foods's EPS has grown 19% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Nissin Foods maintained stable EBIT margins over the last year, all while growing revenue 11% to HK$3.4b. That's progress.

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.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Nissin Foods?

Are Nissin Foods Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Although we did see some insider selling (worth -HK$4.2m) this was overshadowed by a mountain of buying, totalling HK$13m in just one year. This makes me even more interested in Nissin Foods because it suggests that those who understand the company best, are optimistic. We also note that it was the Chairman & CEO, Kiyotaka Ando, who made the biggest single acquisition, paying HK$4.8m for shares at about HK$7.96 each.

The good news, alongside the insider buying, for Nissin Foods bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have HK$124m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Nissin Foods To Your Watchlist?

For growth investors like me, Nissin Foods's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Now, you could try to make up your mind on Nissin Foods by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

As a growth investor I do like to see insider buying. But Nissin Foods 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. 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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