With EPS Growth And More, Sinosoft Technology Group (HKG:1297) Is Interesting

By
Simply Wall St
Published
May 26, 2021
SEHK:1297
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Sinosoft Technology Group

How Quickly Is Sinosoft Technology Group Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Sinosoft Technology Group has managed to grow EPS by 26% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. Unfortunately, revenue is down and so are margins. That is, not a hint of euphemism here, suboptimal.

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.

earnings-and-revenue-history
SEHK:1297 Earnings and Revenue History May 26th 2021

Sinosoft Technology Group isn't a huge company, given its market capitalization of HK$2.3b. That makes it extra important to check on its balance sheet strength.

Are Sinosoft Technology Group Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Sinosoft Technology Group insiders own a significant number of shares certainly appeals to me. Actually, with 48% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have CN¥1.1b invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Sinosoft Technology Group To Your Watchlist?

For growth investors like me, Sinosoft Technology Group's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Even so, be aware that Sinosoft Technology Group is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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