If You Like EPS Growth Then Check Out Chow Tai Fook Jewellery Group (HKG:1929) Before It's Too Late

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. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Chow Tai Fook Jewellery Group (HKG:1929). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Chow Tai Fook Jewellery Group

How Fast Is Chow Tai Fook Jewellery Group 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. Over the last three years, Chow Tai Fook Jewellery Group has grown EPS by 14% per year. That's a good rate of growth, if it can be sustained.

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. The good news is that Chow Tai Fook Jewellery Group is growing revenues, and EBIT margins improved by 3.7 percentage points to 12%, over the last year. 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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Chow Tai Fook Jewellery Group.

Are Chow Tai Fook Jewellery Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Chow Tai Fook Jewellery Group shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that GM & Executive Director Chi-Keung Suen bought HK$308k worth of shares at an average price of around HK$15.40.

Should You Add Chow Tai Fook Jewellery Group To Your Watchlist?

As I already mentioned, Chow Tai Fook Jewellery Group is a growing business, which is what I like to see. Not every business can grow its EPS, but Chow Tai Fook Jewellery Group certainly can. The icing on the cake is that an insider bought shares during the year, which inclines me to put this one on a watchlist. It is worth noting though that we have found 2 warning signs for Chow Tai Fook Jewellery Group that you need to take into consideration.

As a growth investor I do like to see insider buying. But Chow Tai Fook Jewellery Group isn't the only one. You can see a a free list of them here.

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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