Does YTO Express (International) Holdings (HKG:6123) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in YTO Express (International) Holdings (HKG:6123). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out the opportunities and risks within the HK Logistics industry.

YTO Express (International) Holdings' Improving Profits

YTO Express (International) Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. It's good to see that YTO Express (International) Holdings' EPS has grown from HK$0.61 to HK$0.71 over twelve months. There's little doubt shareholders would be happy with that 17% gain.

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 we note YTO Express (International) Holdings achieved similar EBIT margins to last year, revenue grew by a solid 35% to HK$8.0b. That's progress.

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.

YTO Express (International) Holdings isn't a huge company, given its market capitalisation of HK$949m. That makes it extra important to check on its balance sheet strength.

Are YTO Express (International) Holdings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

Shareholders in YTO Express (International) Holdings will be more than happy to see insiders committing themselves to the company, spending HK$2.2m on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was Non-Executive Director Xinwei Yang who made the biggest single purchase, worth HK$467k, paying HK$2.54 per share.

Does YTO Express (International) Holdings Deserve A Spot On Your Watchlist?

As previously touched on, YTO Express (International) Holdings is a growing business, which is encouraging. While some companies are struggling to grow EPS, YTO Express (International) Holdings seems free from that morose affliction. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. Still, you should learn about the 1 warning sign we've spotted with YTO Express (International) Holdings.

Keen growth investors love to see insider buying. Thankfully, YTO Express (International) Holdings isn't the only one. You can see a 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. 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.