If You Like EPS Growth Then Check Out MS Group Holdings (HKG:1451) Before It's Too Late

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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like MS Group Holdings (HKG:1451). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for MS Group Holdings

How Fast Is MS Group Holdings Growing Its Earnings Per Share?

In the last three years MS Group Holdings'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. Thus, it makes sense to focus on more recent growth rates, instead. MS Group Holdings has grown its trailing twelve month EPS from HK$0.071 to HK$0.076, in the last year. That's a modest gain of 7.0%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note MS Group Holdings's EBIT margins were flat over the last year, revenue grew by a solid 18% to HK$279m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

MS Group Holdings isn't a huge company, given its market capitalization of HK$99m. That makes it extra important to check on its balance sheet strength.

Are MS Group Holdings 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 MS Group Holdings insiders own a significant number of shares certainly appeals to me. In fact, they own 75% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, MS Group Holdings is a very small company, with a market cap of only HK$99m. So despite a large proportional holding, insiders only have HK$74m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations under HK$1.6b, like MS Group Holdings, the median CEO pay is around HK$1.8m.

MS Group Holdings offered total compensation worth HK$1.0m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is MS Group Holdings Worth Keeping An Eye On?

As I already mentioned, MS Group Holdings is a growing business, which is what I like to see. Earnings growth might be the main game for MS Group Holdings, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. You still need to take note of risks, for example - MS Group Holdings has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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. 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.