I Built A List Of Growing Companies And Zhuguang Holdings Group (HKG:1176) Made The Cut

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

In contrast to all that, I prefer to spend time on companies like Zhuguang Holdings Group (HKG:1176), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Zhuguang Holdings Group

Zhuguang Holdings Group's Improving Profits

In the last three years Zhuguang 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 Zhuguang Holdings Group's EPS have grown from HK$0.057 to HK$0.064 over twelve months. That's a 14% gain; respectable growth in the broader scheme of things.

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. Unfortunately, Zhuguang Holdings Group's revenue dropped 6.6% last year, but the silver lining is that EBIT margins improved from 26% to 51%. That's not ideal.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Zhuguang Holdings Group Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Zhuguang Holdings Group shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at HK$475m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Does Zhuguang Holdings Group Deserve A Spot On Your Watchlist?

As I already mentioned, Zhuguang Holdings Group is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Even so, be aware that Zhuguang Holdings Group is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

Although Zhuguang 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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