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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 Camsing International Holding (HKG:2662). While profit is not necessarily a social good, it’s easy to admire a business than can consistently produce it. 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.
How Fast Is Camsing International Holding Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Camsing International Holding’s EPS went from HK$0.05 to HK$0.16 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Camsing International Holding is growing revenues, and EBIT margins improved by 2.5 percentage points to 6.4%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
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 profitability drives the upside, prudent investors always check the balance sheet, too.
Are Camsing International Holding Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we’re pleased to report that Camsing International Holding insiders own a meaningful share of the business. Indeed, with a collective holding of 65%, 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. And that holding is extremely valuable at the current share price, totalling HK$6.1b. Now that’s what I call some serious skin in the game!
Should You Add Camsing International Holding To Your Watchlist?
Camsing International Holding’s earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it’s worth considering Camsing International Holding for a spot on your watchlist. Of course, profit growth is one thing but it’s even better if Camsing International Holding is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.