Here's Why I Think China International Holdings (SGX:BEH) Is An Interesting Stock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like China International Holdings (SGX:BEH). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

See our latest analysis for China International Holdings

How Fast Is China International Holdings Growing Its Earnings Per Share?

In the last three years China International Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. China International Holdings boosted its trailing twelve month EPS from CN¥0.64 to CN¥0.80, in the last year. That's a 25% gain; respectable growth in the broader scheme of things.

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. China International Holdings maintained stable EBIT margins over the last year, all while growing revenue 25% to CN¥154m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

China International Holdings isn't a huge company, given its market capitalization of S$27m. That makes it extra important to check on its balance sheet strength.

Are China International Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling China International Holdings shares, in the last year. So it's definitely nice that Tatkwong Lee bought CN¥14k worth of shares at an average price of around CN¥0.38.

On top of the insider buying, we can also see that China International Holdings insiders own a large chunk of the company. Actually, with 49% 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. Valued at only S$27m China International Holdings is really small for a listed company. So despite a large proportional holding, insiders only have CN¥13m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is China International Holdings Worth Keeping An Eye On?

One positive for China International Holdings is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. We don't want to rain on the parade too much, but we did also find 5 warning signs for China International Holdings (2 are a bit unpleasant!) that you need to be mindful of.

As a growth investor I do like to see insider buying. But China 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.

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.

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