Here's Why I Think Sinosoft Technology Group (HKG:1297) Is An Interesting Stock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Sinosoft Technology Group (HKG:1297). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

Check out our latest analysis for Sinosoft Technology Group

How Fast Is Sinosoft Technology Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Sinosoft Technology Group grew its EPS by 9.9% per year. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While Sinosoft Technology Group may have maintained EBIT margins over the last year, revenue has fallen. And that does make me a little more cautious of the stock.

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.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Sinosoft Technology Group?

Are Sinosoft Technology Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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 Sinosoft Technology Group, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction Chairlady & CEO Yingmei Xin paid HK$2.8m, for stock at HK$0.94 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Sinosoft Technology Group insiders own more than a third of the company. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about CN¥1.3b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does Sinosoft Technology Group Deserve A Spot On Your Watchlist?

As I already mentioned, Sinosoft Technology Group is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Sinosoft Technology Group that you should be aware of.

The good news is that Sinosoft Technology Group 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.

If you’re looking to trade Sinosoft Technology Group, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.