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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In contrast to all that, I prefer to spend time on companies like Country Garden Holdings (HKG:2007), which has not only revenues, but also profits. While profit is not necessarily a social good, it’s easy to admire a business than 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.
How Fast Is Country Garden Holdings Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It’s no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Country Garden Holdings has grown EPS by 56% per year, over the last three years. While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a glint in the eye of my lover.
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. While we note Country Garden Holdings’s EBIT margins were flat over the last year, revenue grew by a solid 67% to CN¥379b. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.
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 Country Garden Holdings.
Are Country Garden 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, small purchases are not always indicative of conviction, and insiders don’t always get it right.
The good news is that Country Garden Holdings insiders spent a whopping CN¥797m on stock in just one year, and I didn’t see any selling. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. Zooming in, we can see that the biggest insider purchase was by Co-Chairman Huiyan Yang for HK$198m worth of shares, at about HK$13.18 per share.
And the insider buying isn’t the only sign of alignment between shareholders and the board, since Country Garden Holdings insiders own more than a third of the company. In fact, hey own 58% of the company, so they will share in the same delights and challenged 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 that holding is extremely valuable at the current share price, totalling CN¥157b. That means they have plenty of their own capital riding on the performance of the business!
Should You Add Country Garden Holdings To Your Watchlist?
Country Garden Holdings’s earnings per share have taken off like a rocket aimed right at the moon. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. If that’s the case, you may regret neglecting to put Country Garden Holdings on your watchlist. Now, you could try to make up your mind on Country Garden Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Country Garden 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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.