If You Like EPS Growth Then Check Out China Resources Beer (Holdings) (HKG:291) Before It's Too Late

By
Simply Wall St
Published
November 19, 2021
SEHK:291
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in China Resources Beer (Holdings) (HKG:291). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 China Resources Beer (Holdings)

How Fast Is China Resources Beer (Holdings) Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that China Resources Beer (Holdings) has grown EPS by 42% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. The good news is that China Resources Beer (Holdings) is growing revenues, and EBIT margins improved by 3.7 percentage points to 9.5%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
SEHK:291 Earnings and Revenue History November 19th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of China Resources Beer (Holdings)'s forecast profits?

Are China Resources Beer (Holdings) Insiders Aligned With All Shareholders?

Since China Resources Beer (Holdings) has a market capitalization of HK$211b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they hold CN¥94m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.04% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does China Resources Beer (Holdings) Deserve A Spot On Your Watchlist?

China Resources Beer (Holdings)'s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering China Resources Beer (Holdings) for a spot on your watchlist. Before you take the next step you should know about the 2 warning signs for China Resources Beer (Holdings) that we have uncovered.

You can invest in 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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