Here's Why We Think MEIGU Technology Holding Group (HKG:8349) Is Well Worth Watching

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

So if you're like me, you might be more interested in profitable, growing companies, like MEIGU Technology Holding Group (HKG:8349). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for MEIGU Technology Holding Group

How Fast Is MEIGU Technology Holding Group Growing Its Earnings Per Share?

Over the last three years, MEIGU Technology Holding Group has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. MEIGU Technology Holding Group boosted its trailing twelve month EPS from CN¥0.012 to CN¥0.014, in the last year. I doubt many would complain about that 17% gain.

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 MEIGU Technology Holding Group's EBIT margins were flat over the last year, revenue grew by a solid 18% to CN¥94m. That's progress.

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.

MEIGU Technology Holding Group isn't a huge company, given its market capitalization of HK$228m. That makes it extra important to check on its balance sheet strength.

Are MEIGU Technology Holding Group Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that MEIGU Technology Holding Group insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 67%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have CN¥152m invested in the business, using the current share price. That's nothing to sneeze at!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like MEIGU Technology Holding Group with market caps under CN¥1.3b is about CN¥1.5m.

The CEO of MEIGU Technology Holding Group only received CN¥646k in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add MEIGU Technology Holding Group To Your Watchlist?

As I already mentioned, MEIGU Technology Holding Group is a growing business, which is what I like to see. Earnings growth might be the main game for MEIGU Technology Holding Group, 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. We should say that we've discovered 2 warning signs for MEIGU Technology Holding Group that you should be aware of before investing here.

Although MEIGU Technology Holding 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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