For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Pan Asia Environmental Protection Group (HKG:556). 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.
Check out our latest analysis for Pan Asia Environmental Protection Group
How Fast Is Pan Asia Environmental Protection Group Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Pan Asia Environmental Protection Group has grown EPS by 34% per year, compound, in the last three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Pan Asia Environmental Protection Group achieved similar EBIT margins to last year, revenue grew by a solid 11% to CN¥227m. That's progress.
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 Pan Asia Environmental Protection Group is no giant, with a market capitalisation of HK$703m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Pan Asia Environmental Protection Group Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Pan Asia Environmental Protection Group followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have CN¥197m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 28% of the company, demonstrating a degree of high-level alignment with shareholders.
Does Pan Asia Environmental Protection Group Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Pan Asia Environmental Protection Group's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Even so, be aware that Pan Asia Environmental Protection Group is showing 2 warning signs in our investment analysis , you should know about...
Although Pan Asia Environmental Protection 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.