Stock Analysis

With EPS Growth And More, China-Hongkong Photo Products Holdings (HKG:1123) Makes An Interesting Case

SEHK:1123
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like China-Hongkong Photo Products Holdings (HKG:1123), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for China-Hongkong Photo Products Holdings

China-Hongkong Photo Products Holdings' Improving Profits

Over the last three years, China-Hongkong Photo Products Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. China-Hongkong Photo Products Holdings' EPS skyrocketed from HK$0.015 to HK$0.023, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 52%.

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. While we note China-Hongkong Photo Products Holdings achieved similar EBIT margins to last year, revenue grew by a solid 14% to HK$1.1b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
SEHK:1123 Earnings and Revenue History June 1st 2023

China-Hongkong Photo Products Holdings isn't a huge company, given its market capitalisation of HK$164m. That makes it extra important to check on its balance sheet strength.

Are China-Hongkong Photo Products Holdings Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that China-Hongkong Photo Products Holdings insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 60% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only HK$164m China-Hongkong Photo Products Holdings is really small for a listed company. So despite a large proportional holding, insiders only have HK$98m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is China-Hongkong Photo Products Holdings Worth Keeping An Eye On?

For growth investors, China-Hongkong Photo Products Holdings' raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for China-Hongkong Photo Products Holdings that you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

Valuation is complex, but we're helping make it simple.

Find out whether China-Hongkong Photo Products Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.