The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Dynasty Fine Wines Group (HKG:828). 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 Dynasty Fine Wines Group
How Quickly Is Dynasty Fine Wines Group Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Dynasty Fine Wines Group grew its EPS by 16% per year. That growth rate is fairly good, assuming the company can keep it up.
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. This approach makes Dynasty Fine Wines Group look pretty good, on balance; although revenue is flattish, EBIT margins improved from 1.4% to 5.9% in the last year. Which is a great look for the company.
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.
Dynasty Fine Wines Group isn't a huge company, given its market capitalisation of HK$535m. That makes it extra important to check on its balance sheet strength.
Are Dynasty Fine Wines Group Insiders Aligned With All Shareholders?
As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Dynasty Fine Wines Group with market caps under HK$1.6b is about HK$1.8m.
The CEO of Dynasty Fine Wines Group was paid just HK$457k in total compensation for the year ending December 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.
Does Dynasty Fine Wines Group Deserve A Spot On Your Watchlist?
As previously touched on, Dynasty Fine Wines Group is a growing business, which is encouraging. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all Dynasty Fine Wines Group is worthy at least considering for your watchlist. It is worth noting though that we have found 3 warning signs for Dynasty Fine Wines Group (1 doesn't sit too well with us!) that you need to take into consideration.
Although Dynasty Fine Wines Group 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 Hong Kong 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.