If You Like EPS Growth Then Check Out Xinyi Solar Holdings (HKG:968) Before It's Too Late

By
Simply Wall St
Published
November 29, 2021
SEHK:968
Source: Shutterstock

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 completely lacks a track record of revenue and 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.

So if you're like me, you might be more interested in profitable, growing companies, like Xinyi Solar Holdings (HKG:968). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Xinyi Solar Holdings

How Fast Is Xinyi Solar Holdings Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Xinyi Solar Holdings has managed to grow EPS by 31% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Xinyi Solar Holdings shareholders can take confidence from the fact that EBIT margins are up from 40% to 51%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

earnings-and-revenue-history
SEHK:968 Earnings and Revenue History November 30th 2021

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

Are Xinyi Solar 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. 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.

One gleaming positive for Xinyi Solar Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction Ching Wai Li paid HK$6.4m, for stock at HK$16.06 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

The good news, alongside the insider buying, for Xinyi Solar Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at HK$32b. Coming in at 26% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Should You Add Xinyi Solar Holdings To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Xinyi Solar Holdings's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. We should say that we've discovered 3 warning signs for Xinyi Solar Holdings that you should be aware of before investing here.

The good news is that Xinyi Solar 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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