If You Like EPS Growth Then Check Out China SCE Group Holdings (HKG:1966) Before It's Too Late

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 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 China SCE Group Holdings (HKG:1966). 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 China SCE Group Holdings

How Quickly Is China SCE Group Holdings Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. China SCE Group Holdings managed to grow EPS by 4.2% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. On the one hand, China SCE Group Holdings's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

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 China SCE Group Holdings.

Are China SCE Group 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

One gleaming positive for China SCE Group Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, the Chairman, Chiu Wong, accumulated CN¥21m worth of shares around CN¥4.14. It doesn't get much better than that, in terms of large investments from insiders.

On top of the insider buying, we can also see that China SCE Group Holdings insiders own a large chunk of the company. Indeed, with a collective holding of 61%, 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. And their holding is extremely valuable at the current share price, totalling CN¥9.0b. That means they have plenty of their own capital riding on the performance of the business!

Should You Add China SCE Group Holdings To Your Watchlist?

One important encouraging feature of China SCE Group Holdings is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. However, before you get too excited we've discovered 2 warning signs for China SCE Group Holdings (1 is potentially serious!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of China SCE Group 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.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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