With EPS Growth And More, Edensoft Holdings (HKG:1147) Makes An Interesting Case

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

In contrast to all that, many investors prefer to focus on companies like Edensoft Holdings (HKG:1147), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Edensoft Holdings with the means to add long-term value to shareholders.

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Edensoft Holdings' Earnings Per Share Are 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) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Edensoft Holdings has grown EPS by 6.6% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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 Edensoft Holdings achieved similar EBIT margins to last year, revenue grew by a solid 28% to CN¥1.1b. That's a real positive.

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.

View our latest analysis for Edensoft Holdings

Edensoft Holdings isn't a huge company, given its market capitalisation of HK$356m. That makes it extra important to check on its balance sheet strength.

Are Edensoft Holdings Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Edensoft Holdings with market caps under CN¥1.4b is about CN¥1.6m.

Edensoft Holdings offered total compensation worth CN¥1.1m to its CEO in the year to December 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Edensoft Holdings To Your Watchlist?

As previously touched on, Edensoft Holdings is a growing business, which is encouraging. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all Edensoft Holdings is worthy at least considering for your watchlist. We should say that we've discovered 3 warning signs for Edensoft Holdings (2 don't sit too well with us!) that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in HK with promising growth potential and insider confidence.

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.