With EPS Growth And More, Xinyi Energy Holdings (HKG:3868) Is Interesting

By
Simply Wall St
Published
April 06, 2022
SEHK:3868
Source: Shutterstock

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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Xinyi Energy Holdings (HKG:3868). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Xinyi Energy Holdings

How Fast Is Xinyi Energy Holdings Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, Xinyi Energy Holdings's EPS soared from HK$0.13 to HK$0.17, in just one year. That's a impressive gain of 29%.

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. Xinyi Energy Holdings maintained stable EBIT margins over the last year, all while growing revenue 33% to HK$2.3b. 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.

earnings-and-revenue-history
SEHK:3868 Earnings and Revenue History April 6th 2022

Fortunately, we've got access to analyst forecasts of Xinyi Energy Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Xinyi Energy Holdings Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Xinyi Energy Holdings shares worth a considerable sum. Notably, they have an enormous stake in the company, worth HK$7.1b. Coming in at 21% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Should You Add Xinyi Energy Holdings To Your Watchlist?

You can't deny that Xinyi Energy Holdings has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. What about risks? Every company has them, and we've spotted 1 warning sign for Xinyi Energy Holdings you should know about.

Although Xinyi Energy Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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