Here's Why I Think HouseFreedomLtd (FKSE:8996) Might Deserve Your Attention Today

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in HouseFreedomLtd (FKSE:8996). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for HouseFreedomLtd

How Fast Is HouseFreedomLtd Growing Its Earnings Per Share?

Over the last three years, HouseFreedomLtd has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, HouseFreedomLtd's EPS shot from JP¥66.75 to JP¥139, over the last year. You don't see 108% year-on-year growth like that, very often.

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 HouseFreedomLtd is growing revenues, and EBIT margins improved by 3.1 percentage points to 8.0%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

HouseFreedomLtd isn't a huge company, given its market capitalization of JP¥3.2b. That makes it extra important to check on its balance sheet strength.

Are HouseFreedomLtd Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that HouseFreedomLtd insiders own a significant number of shares certainly appeals to me. Actually, with 40% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, HouseFreedomLtd is a very small company, with a market cap of only JP¥3.2b. That means insiders only have JP¥1.3b worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Does HouseFreedomLtd Deserve A Spot On Your Watchlist?

HouseFreedomLtd's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. 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 HouseFreedomLtd for a spot on your watchlist. Still, you should learn about the 3 warning signs we've spotted with HouseFreedomLtd .

Although HouseFreedomLtd 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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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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