I Ran A Stock Scan For Earnings Growth And Modern Living Investments Holdings (HKG:8426) Passed With Ease

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Modern Living Investments Holdings (HKG:8426), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Modern Living Investments Holdings

How Fast Is Modern Living Investments Holdings Growing Its Earnings Per Share?

Over the last three years, Modern Living Investments Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Modern Living Investments Holdings's EPS shot from HK$0.0099 to HK$0.023, over the last year. Year on year growth of 134% is certainly a sight to behold.

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. Modern Living Investments Holdings shareholders can take confidence from the fact that EBIT margins are up from 1.9% to 5.1%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Modern Living Investments Holdings isn't a huge company, given its market capitalization of HK$131m. That makes it extra important to check on its balance sheet strength.

Are Modern Living Investments Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Any way you look at it Modern Living Investments Holdings shareholders can gain quiet confidence from the fact that insiders shelled out HK$2.4m to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. It is also worth noting that it was CEO, Company Secretary & Executive Director Fuk Wah Ng who made the biggest single purchase, worth HK$272k, paying HK$0.15 per share.

It's reassuring that Modern Living Investments Holdings insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations under HK$1.6b, like Modern Living Investments Holdings, the median CEO pay is around HK$1.8m.

The Modern Living Investments Holdings CEO received HK$954k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. 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. 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's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The company can also boast of insider buying, and reasonable remuneration for the CEO. It could be that Modern Living Investments Holdings is at an inflection point, given the EPS growth. If so, then it the potential for further gains probably merit a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Modern Living Investments Holdings you should be aware of.

The good news is that Modern Living Investments Holdings is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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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