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. 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 Uni-President China Holdings (HKG:220). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Uni-President China Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Uni-President China Holdings
How Fast Is Uni-President China Holdings Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Uni-President China Holdings managed to grow EPS by 7.6% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
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. EBIT margins for Uni-President China Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 2.0% to CN¥29b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Uni-President China Holdings.
Are Uni-President China 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, small purchases are not always indicative of conviction, and insiders don't always get it right.
First things first, there weren't any reports of insiders selling shares in Uni-President China Holdings in the last 12 months. But the really good news is that President & Executive Director Xinhua Liu spent CN¥1.7m buying stock, at an average price of around CN¥5.62. Big buys like that may signal an opportunity; actions speak louder than words.
Does Uni-President China Holdings Deserve A Spot On Your Watchlist?
As previously touched on, Uni-President China Holdings is a growing business, which is encouraging. It's not easy for business to grow EPS, but Uni-President China Holdings has shown the strengths to do just that. The icing on the cake is that an insider bought shares during the year; a point of interest for people who will want to keep a watchful eye on this stock. We should say that we've discovered 2 warning signs for Uni-President China Holdings that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Uni-President China Holdings, you'll probably love this curated collection of companies in HK that have an attractive valuation alongside insider buying in the last three months.
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.