Does Sun Hing Vision Group Holdings (HKG:125) Deserve A Spot On Your Watchlist?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Sun Hing Vision Group Holdings (HKG:125). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Sun Hing Vision Group Holdings

Sun Hing Vision Group Holdings's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Sun Hing Vision Group Holdings managed to grow EPS by 9.2% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. Sun Hing Vision Group Holdings maintained stable EBIT margins over the last year, all while growing revenue 22% to HK$1.2b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Sun Hing Vision Group Holdings isn't a huge company, given its market capitalization of HK$749m. That makes it extra important to check on its balance sheet strength.

Are Sun Hing Vision Group Holdings Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like Sun Hing Vision Group Holdings with market caps under HK$1.6b is about HK$1.8m.

Sun Hing Vision Group Holdings offered total compensation worth HK$1.2m to its CEO in the year to March 2018. That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Sun Hing Vision Group Holdings Worth Keeping An Eye On?

As I already mentioned, Sun Hing Vision Group Holdings is a growing business, which is what I like to see. Not only that, but the CEO is paid quite reasonably, which makes me feel more trusting of the board of directors. So I do think the stock deserves further research, if not instant addition to your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Sun Hing Vision Group Holdings is trading on a high P/E or a low P/E, relative to its industry.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.