Here's Why We Think Modern Living Investments Holdings (HKG:8426) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Modern Living Investments Holdings (HKG:8426). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Modern Living Investments Holdings

Modern Living Investments Holdings' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Modern Living Investments Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 50%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. We note that while EBIT margins have improved from 2.3% to 5.4%, the company has actually reported a fall in revenue by 6.3%. That's not a good look.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Modern Living Investments Holdings is no giant, with a market capitalisation of HK$133m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Modern Living Investments Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

With strong conviction, Modern Living Investments Holdings insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the HK$670k that CEO, Company Secretary & Executive Director Fuk Wah Ng spent buying shares (at an average price of about HK$0.16). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Recent insider purchases of Modern Living Investments Holdings stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, Modern Living Investments Holdings has a very reasonable level of CEO pay. The median total compensation for CEOs of companies similar in size to Modern Living Investments Holdings, with market caps under HK$1.6b is around HK$1.9m.

Modern Living Investments Holdings' CEO took home a total compensation package worth HK$1.0m in the year leading up to December 2021. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Modern Living Investments Holdings Worth Keeping An Eye On?

Modern Living Investments Holdings' earnings per share growth have been climbing higher at an appreciable rate. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that Modern Living Investments Holdings is at an inflection point, given the EPS growth. If so, then its potential for further gains probably merit a spot on your watchlist. We should say that we've discovered 2 warning signs for Modern Living Investments Holdings that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Modern Living Investments 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.