Here's Why I Think Tiangong International (HKG:826) Might Deserve Your Attention Today

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Tiangong International (HKG:826). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Tiangong International

Tiangong International's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Impressively, Tiangong International has grown EPS by 33% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. While we note Tiangong International's EBIT margins were flat over the last year, revenue grew by a solid 5.0% to CN¥5.3b. That's a real positive.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Tiangong International's forecast profits?

Are Tiangong International Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

The good news is that Tiangong International insiders spent a whopping CN¥59m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the CEO & Chief Investment Officer, Zefeng Zhu, who made the biggest single acquisition, paying HK$11m for shares at about HK$3.71 each.

Along with the insider buying, another encouraging sign for Tiangong International is that insiders, as a group, have a considerable shareholding. Notably, they have an enormous stake in the company, worth CN¥3.6b. Coming in at 29% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Is Tiangong International Worth Keeping An Eye On?

You can't deny that Tiangong International has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. We don't want to rain on the parade too much, but we did also find 1 warning sign for Tiangong International that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Tiangong International, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.