If You Like EPS Growth Then Check Out Modern Living Investments Holdings (HKG:8426) Before It's Too Late

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. 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. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Modern Living Investments Holdings

How Fast Is Modern Living Investments Holdings Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Modern Living Investments Holdings's stratospheric annual EPS growth of 51%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. While we note Modern Living Investments Holdings's EBIT margins were flat over the last year, revenue grew by a solid 20% to HK$488m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Modern Living Investments Holdings is no giant, with a market capitalization of HK$142m, so 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?

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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Any way you look at it Modern Living Investments Holdings shareholders can gain quiet confidence from the fact that insiders shelled out HK$2.7m 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.

I do like that insiders have been buying shares in Modern Living Investments Holdings, but there is more evidence of shareholder friendly management. 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$982k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Modern Living Investments Holdings Deserve A Spot On Your Watchlist?

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. The strong EPS growth suggests Modern Living Investments Holdings may be at an inflection point. For those chasing fast growth, then, I'd suggest to stock merits monitoring. What about risks? Every company has them, and we've spotted 3 warning signs for Modern Living Investments Holdings you should know about.

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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