If EPS Growth Is Important To You, XMH Holdings (SGX:BQF) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like XMH Holdings (SGX:BQF). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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XMH Holdings' Improving Profits

XMH 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. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, XMH Holdings' EPS catapulted from S$0.086 to S$0.17, over the last year. It's a rarity to see 99% year-on-year growth like that.

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. XMH Holdings' EBIT margins have actually improved by 8.7 percentage points in the last year, to reach 21%, but, on the flip side, revenue was down 15%. That's not a good look.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Check out our latest analysis for XMH Holdings

XMH Holdings isn't a huge company, given its market capitalisation of S$84m. That makes it extra important to check on its balance sheet strength.

Are XMH Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First and foremost; there we saw no insiders sell XMH Holdings shares in the last year. But the important part is that Chairman & MD Tin Yeow Tan spent S$277k buying stock, at an average price of S$0.57. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for XMH Holdings will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 98%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about S$83m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is XMH Holdings Worth Keeping An Eye On?

XMH Holdings' earnings have taken off in quite an impressive fashion. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest XMH Holdings belongs near the top of your watchlist. We should say that we've discovered 3 warning signs for XMH Holdings (1 is significant!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of XMH Holdings, you'll probably love this curated collection of companies in SG that have an attractive valuation alongside insider buying in the last three months.

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.