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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 contrast to all that, I prefer to spend time on companies like K. Wah International Holdings (HKG:173), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for K. Wah International Holdings
K. Wah International Holdings's Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Impressively, K. Wah International Holdings has grown EPS by 18% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. K. Wah International Holdings shareholders can take confidence from the fact that EBIT margins are up from 28% to 37%, and revenue is growing. That's great to see, on both counts.
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.
Fortunately, we've got access to analyst forecasts of K. Wah International Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are K. Wah International Holdings Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's a pleasure to note that insiders spent HK$120m buying K. Wah International Holdings shares, over the last year, without reporting any share sales whatsoever. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. It is also worth noting that it was Chairman Che-Woo Lui who made the biggest single purchase, worth HK$13m, paying HK$3.30 per share.