Here's Why JOYY (NASDAQ:YY) Has Caught The Eye Of Investors

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.

In contrast to all that, many investors prefer to focus on companies like JOYY (NASDAQ:YY), which has not only revenues, but also profits. 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.

View our latest analysis for JOYY

How Fast Is JOYY Growing Its Earnings Per Share?

In the last three years JOYY's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, JOYY's EPS grew from US$2.45 to US$6.18, over the previous 12 months. Year on year growth of 153% is certainly a sight to behold.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that JOYY's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Despite consistency in EBIT margins year on year, JOYY has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for JOYY.

Are JOYY Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that JOYY insiders own a significant number of shares certainly is appealing. In fact, they own 41% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. That level of investment from insiders is nothing to sneeze at.

Does JOYY Deserve A Spot On Your Watchlist?

JOYY's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, JOYY is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You still need to take note of risks, for example - JOYY has 3 warning signs (and 1 which is significant) we think you should know about.

Although JOYY certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.