Should You Be Adding Golden Throat Holdings Group (HKG:6896) To Your Watchlist Today?

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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Golden Throat Holdings Group (HKG:6896). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Golden Throat Holdings Group

Golden Throat Holdings Group's Improving Profits

In the last three years Golden Throat Holdings Group's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. It's good to see that Golden Throat Holdings Group's EPS have grown from CN¥0.16 to CN¥0.19 over twelve months. That's a 16% gain; respectable growth in the broader scheme of things.

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, Golden Throat Holdings Group's revenue dropped 15% last year, but the silver lining is that EBIT margins improved from 23% to 26%. That falls short of ideal.

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.

Golden Throat Holdings Group isn't a huge company, given its market capitalization of HK$983m. That makes it extra important to check on its balance sheet strength.

Are Golden Throat Holdings Group Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Golden Throat Holdings Group insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 62%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have CN¥608m invested in the business, using the current share price. That's nothing to sneeze at!

Is Golden Throat Holdings Group Worth Keeping An Eye On?

One important encouraging feature of Golden Throat Holdings Group is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Before you take the next step you should know about the 2 warning signs for Golden Throat Holdings Group (1 is a bit concerning!) that we have uncovered.

Although Golden Throat Holdings Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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