Here's Why I Think SUNeVision Holdings (HKG:1686) Might Deserve Your Attention Today

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like SUNeVision Holdings (HKG:1686). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for SUNeVision Holdings

How Fast Is SUNeVision Holdings Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. SUNeVision Holdings boosted its trailing twelve month EPS from HK$0.16 to HK$0.17, in the last year. I doubt many would complain about that 10% gain.

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). While we note SUNeVision Holdings's EBIT margins were flat over the last year, revenue grew by a solid 9.7% to HK$1.7b. 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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for SUNeVision Holdings.

Are SUNeVision Holdings Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Like a sturdy phalanx SUNeVision Holdings insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the CEO & Executive Director, Kwok Kong Tong, paid HK$478k to buy shares at an average price of HK$4.78.

Along with the insider buying, another encouraging sign for SUNeVision Holdings is that insiders, as a group, have a considerable shareholding. Indeed, they hold HK$124m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is SUNeVision Holdings Worth Keeping An Eye On?

One important encouraging feature of SUNeVision Holdings is that it is growing profits. 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. We don't want to rain on the parade too much, but we did also find 2 warning signs for SUNeVision Holdings (1 doesn't sit too well with us!) that you need to be mindful of.

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