It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ming Fai International Holdings (HKG:3828). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Ming Fai International Holdings
How Fast Is Ming Fai International Holdings Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Ming Fai International Holdings managed to grow EPS by 9.4% per year, over three years. That's a pretty good rate, if the company can sustain it.
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. Ming Fai International Holdings maintained stable EBIT margins over the last year, all while growing revenue 15% to HK$2.1b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since Ming Fai International Holdings is no giant, with a market capitalisation of HK$573m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Ming Fai International Holdings Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
It's nice to see that there have been no reports of any insiders selling shares in Ming Fai International Holdings in the previous 12 months. With that in mind, it's heartening that David Webb, the company insider of the company, paid HK$303k for shares at around HK$0.70 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.
These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Ming Fai International Holdings will reveal that insiders own a significant piece of the pie. Owning 46% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about HK$265m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!
Does Ming Fai International Holdings Deserve A Spot On Your Watchlist?
One positive for Ming Fai International Holdings is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. We should say that we've discovered 3 warning signs for Ming Fai International Holdings (1 can't be ignored!) that you should be aware of before investing here.
Keen growth investors love to see insider activity. Thankfully, Ming Fai International Holdings isn't the only one. You can see a a curated list of Hong Kong companies which have exhibited consistent growth accompanied by high insider ownership.
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