With EPS Growth And More, Guotai Junan International Holdings (HKG:1788) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Guotai Junan International Holdings (HKG:1788). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Guotai Junan International Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Guotai Junan International Holdings has managed to grow EPS by 31% per year over 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. Not all of Guotai Junan International Holdings' revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Guotai Junan International Holdings maintained stable EBIT margins over the last year, all while growing revenue 34% to HK$2.7b. That's a real positive.

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.

Check out our latest analysis for Guotai Junan International Holdings

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Guotai Junan International Holdings Insiders Aligned With All Shareholders?

Since Guotai Junan International Holdings has a market capitalisation of HK$49b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they hold HK$388m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Guotai Junan International Holdings Deserve A Spot On Your Watchlist?

For growth investors, Guotai Junan International Holdings' raw rate of earnings growth is a beacon in the night. 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. It is worth noting though that we have found 2 warning signs for Guotai Junan International Holdings that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Hong Kong companies which have demonstrated growth backed by significant insider holdings.

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.