If EPS Growth Is Important To You, Ming Fai International Holdings (HKG:3828) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Ming Fai International Holdings (HKG:3828). 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.

See our latest analysis for Ming Fai International Holdings

Ming Fai International Holdings' Improving Profits

Over the last three years, Ming Fai International Holdings 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. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Ming Fai International Holdings' EPS soared from HK$0.12 to HK$0.16, over the last year. That's a commendable gain of 36%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Ming Fai International Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to HK$2.2b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Ming Fai International Holdings is no giant, with a market capitalisation of HK$698m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Ming Fai International Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Ming Fai International Holdings shares, in the last year. With that in mind, it's heartening that David Webb, the company insider of the company, paid HK$303k for shares at around HK$0.70 each. It seems that at least one insider is prepared to show the market there is potential within Ming Fai International Holdings.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Ming Fai International Holdings will reveal that insiders own a significant piece of the pie. Owning 46% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. To give you an idea, the value of insiders' holdings in the business are valued at HK$323m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is Ming Fai International Holdings Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Ming Fai International Holdings' strong EPS growth. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. Astute investors will want to keep this stock on watch. We should say that we've discovered 2 warning signs for Ming Fai International Holdings that you should be aware of before investing here.

The good news is that Ming Fai International Holdings is not the only stock with insider buying. Here's a list of small cap, undervalued companies in HK 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.