Here's Why We Think GCL Technology Holdings (HKG:3800) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in GCL Technology Holdings (HKG:3800). 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.

Check out our latest analysis for GCL Technology Holdings

How Fast Is GCL Technology Holdings Growing Its Earnings Per Share?

In the last three years GCL Technology Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, GCL Technology Holdings' EPS catapulted from CN¥0.23 to CN¥0.63, over the last year. It's not often a company can achieve year-on-year growth of 174%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that GCL Technology Holdings is growing revenues, and EBIT margins improved by 21.9 percentage points to 40%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of GCL Technology Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are GCL Technology Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

First things first, there weren't any reports of insiders selling shares in GCL Technology Holdings in the last 12 months. Even better, though, is that the Founder & Executive Chairman, Gongshan Zhu, bought a whopping CN¥5.4m worth of shares, paying about CN¥0.86 per share, on average. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

Should You Add GCL Technology Holdings To Your Watchlist?

GCL Technology Holdings' earnings have taken off in quite an impressive fashion. Growth investors should find it difficult to look past that strong EPS move. And may very well signal a significant inflection point for the business. If this these factors intrigue you, then an addition of GCL Technology Holdings to your watchlist won't go amiss. It is worth noting though that we have found 3 warning signs for GCL Technology Holdings (2 are concerning!) that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of GCL Technology 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.