Does Greenland Hong Kong Holdings (HKG:337) Deserve A Spot On Your Watchlist?

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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Greenland Hong Kong Holdings (HKG:337), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Greenland Hong Kong Holdings

Greenland Hong Kong Holdings's Improving Profits

In the last three years Greenland Hong Kong Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, Greenland Hong Kong Holdings's EPS soared from CN¥0.50 to CN¥0.75, over the last year. That's a impressive gain of 50%.

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. The good news is that Greenland Hong Kong Holdings is growing revenues, and EBIT margins improved by 3.3 percentage points to 21%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Greenland Hong Kong Holdings's balance sheet strength, before getting too excited.

Are Greenland Hong Kong Holdings Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Greenland Hong Kong Holdings insiders have a significant amount of capital invested in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at CN¥956m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does Greenland Hong Kong Holdings Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Greenland Hong Kong Holdings's strong EPS growth. Further, the high level of insider buying impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Greenland Hong Kong Holdings's ROE with industry peers (and the market at large).

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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