Do C C Land Holdings's (HKG:1224) Earnings Warrant Your Attention?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like C C Land Holdings (HKG:1224). 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. 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.

See our latest analysis for C C Land Holdings

How Fast Is C C Land Holdings Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that C C Land Holdings has grown EPS by 53% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that C C Land Holdings's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. To cut to the chase C C Land Holdings's EBIT margins dropped last year, and so did its revenue. That will not make it easy to grow profits, to say the least.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check C C Land Holdings's balance sheet strength, before getting too excited.

Are C C Land Holdings Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One gleaming positive for C C Land Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. In one fell swoop, Chairman of the Board Chung Kiu Cheung, spent HK$683m, at a price of HK$1.95 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

On top of the insider buying, we can also see that C C Land Holdings insiders own a large chunk of the company. In fact, they own 71% 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. And their holding is extremely valuable at the current share price, totalling HK$5.1b. That means they have plenty of their own capital riding on the performance of the business!

Should You Add C C Land Holdings To Your Watchlist?

C C Land Holdings's earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe C C Land Holdings deserves timely attention. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with C C Land Holdings (at least 2 which are concerning) , and understanding them should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of C C Land Holdings, 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.

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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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