Does Powerlong Real Estate Holdings (HKG:1238) Deserve A Spot On Your Watchlist?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Powerlong Real Estate Holdings (HKG:1238). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Powerlong Real Estate Holdings

How Quickly Is Powerlong Real Estate Holdings Increasing Earnings Per Share?

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. Impressively, Powerlong Real Estate Holdings has grown EPS by 20% 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. Powerlong Real Estate Holdings maintained stable EBIT margins over the last year, all while growing revenue 36% to CN¥35b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Powerlong Real Estate Holdings.

Are Powerlong Real Estate Holdings Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.

One gleaming positive for Powerlong Real Estate Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. In one fell swoop, Non-Executive Director Wa Fan Hoi, spent HK$6.5m, at a price of HK$5.30 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Powerlong Real Estate Holdings insiders own more than a third of the company. Indeed, with a collective holding of 65%, company insiders are in control and have plenty of capital behind the venture. 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 CN¥19b. That means they have plenty of their own capital riding on the performance of the business!

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Wa Fong Hoi is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between CN¥13b and CN¥42b, like Powerlong Real Estate Holdings, the median CEO pay is around CN¥4.5m.

The CEO of Powerlong Real Estate Holdings only received CN¥1.2m in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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.

Does Powerlong Real Estate Holdings Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Powerlong Real Estate Holdings's strong EPS growth. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So I do think this is one stock worth watching. You still need to take note of risks, for example - Powerlong Real Estate Holdings has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

As a growth investor I do like to see insider buying. But Powerlong Real Estate Holdings isn't the only one. You can see a 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. 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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