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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like BaWang International (Group) Holding (HKG:1338). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for BaWang International (Group) Holding
How Fast Is BaWang International (Group) Holding Growing Its Earnings Per Share?
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that BaWang International (Group) Holding grew its EPS from CN¥0.00044 to CN¥0.0033, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that BaWang International (Group) Holding is growing revenues, and EBIT margins improved by 4.0 percentage points to 3.9%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
BaWang International (Group) Holding isn't a huge company, given its market capitalisation of HK$183m. That makes it extra important to check on its balance sheet strength.
Are BaWang International (Group) Holding 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 BaWang International (Group) Holding with market caps under CN¥1.4b is about CN¥1.6m.
The BaWang International (Group) Holding CEO received total compensation of only CN¥145k in the year to December 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 a culture of integrity, in a broader sense.
Does BaWang International (Group) Holding Deserve A Spot On Your Watchlist?
BaWang International (Group) Holding's earnings have taken off in quite an impressive fashion. Such fast EPS growth prompts the question: has the business reached an inflection point? What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. It will definitely require further research to be sure, but it does seem that BaWang International (Group) Holding has the hallmarks of a quality business; and that would make it well worth watching. Before you take the next step you should know about the 1 warning sign for BaWang International (Group) Holding that we have uncovered.
Although BaWang International (Group) Holding 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.