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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like B & S International Holdings (HKG:1705), 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.
See our latest analysis for B & S International Holdings
How Quickly Is B & S International Holdings Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. B & S International Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 47%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. The good news is that B & S International Holdings is growing revenues, and EBIT margins improved by 4.9 percentage points to 6.9%, over the last year. Both of which are great metrics to check off for potential growth.
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.
Since B & S International Holdings is no giant, with a market capitalisation of HK$168m, you should definitely check its cash and debt before getting too excited about its prospects.
Are B & S International Holdings Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that B & S International Holdings insiders own a significant number of shares certainly is appealing. In fact, they own 75% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have HK$126m invested in the business, at the current share price. So there's plenty there to keep them focused!
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like B & S International Holdings with market caps under HK$1.6b is about HK$1.8m.
B & S International Holdings offered total compensation worth HK$968k to its CEO in the year to March 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does B & S International Holdings Deserve A Spot On Your Watchlist?
B & S International Holdings' earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. B & S International Holdings is certainly doing some things right and is well worth investigating. You should always think about risks though. Case in point, we've spotted 2 warning signs for B & S International Holdings you should be aware of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Hong Kong companies which have demonstrated growth backed by significant insider holdings.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com