With EPS Growth And More, EFT Solutions Holdings (HKG:8062) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 EFT Solutions Holdings (HKG:8062), 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 EFT Solutions Holdings with the means to add long-term value to shareholders.

View our latest analysis for EFT Solutions Holdings

How Fast Is EFT Solutions Holdings Growing Its Earnings Per Share?

Over the last three years, EFT Solutions Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. EFT Solutions Holdings' EPS shot up from HK$0.025 to HK$0.037; a result that's bound to keep shareholders happy. That's a impressive gain of 51%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While revenue is looking a bit flat, the good news is EBIT margins improved by 5.6 percentage points to 19%, in the last twelve months. That's something to smile about.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

EFT Solutions Holdings isn't a huge company, given its market capitalisation of HK$100m. That makes it extra important to check on its balance sheet strength.

Are EFT Solutions Holdings Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in EFT Solutions Holdings will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 73% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, EFT Solutions Holdings is a very small company, with a market cap of only HK$100m. So despite a large proportional holding, insiders only have HK$73m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to EFT Solutions Holdings, with market caps under HK$1.6b is around HK$1.8m.

EFT Solutions Holdings offered total compensation worth HK$1.6m to its CEO in the year to March 2023. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does EFT Solutions Holdings Deserve A Spot On Your Watchlist?

For growth investors, EFT Solutions Holdings' raw rate of earnings growth is a beacon in the night. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes EFT Solutions Holdings look rather interesting indeed. You still need to take note of risks, for example - EFT Solutions Holdings has 2 warning signs we think you should be aware of.

The beauty of investing is that you can invest in almost 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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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.