Here's Why I Think China Aoyuan Group (HKG:3883) Might Deserve Your Attention Today

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in China Aoyuan Group (HKG:3883). 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.

See our latest analysis for China Aoyuan Group

How Fast Is China Aoyuan Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud China Aoyuan Group's stratospheric annual EPS growth of 59%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. China Aoyuan Group maintained stable EBIT margins over the last year, all while growing revenue 34% to CN¥55b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for China Aoyuan Group's future profits.

Are China Aoyuan Group 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First things first; I didn't see insiders sell China Aoyuan Group shares in the last year. But the really good news is that Executive Director Ka Yeung Chan spent CN¥2.9m buying stock stock, at an average price of around CN¥8.37. To me that means at least one insider thinks that the company is doing well - and they are backing that view with cash.

Is China Aoyuan Group Worth Keeping An Eye On?

China Aoyuan Group's earnings have taken off like any random crypto-currency did, back in 2017. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. 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 China Aoyuan Group on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for China Aoyuan Group that you need to be mindful of.

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