Should You Be Adding Karrie International Holdings (HKG:1050) To Your Watchlist Today?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Karrie International Holdings (HKG:1050). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Karrie International Holdings

How Fast Is Karrie International Holdings Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Karrie International Holdings managed to grow EPS by 11% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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 Karrie International Holdings's EBIT margins were flat over the last year, revenue grew by a solid 6.2% to HK$2.9b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Karrie International Holdings's balance sheet strength, before getting too excited.

Are Karrie International Holdings Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Karrie International Holdings insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at HK$686m, they have plenty of motivation to push the business to succeed. That holding amounts to 21% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Does Karrie International Holdings Deserve A Spot On Your Watchlist?

One positive for Karrie International Holdings is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Still, you should learn about the 4 warning signs we've spotted with Karrie International Holdings (including 2 which can't be ignored) .

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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