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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Hock Lian Seng Holdings (SGX:J2T). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hock Lian Seng Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Hock Lian Seng Holdings
How Fast Is Hock Lian Seng Holdings Growing Its Earnings Per Share?
Hock Lian Seng Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Hock Lian Seng Holdings' EPS shot up from S$0.032 to S$0.052; a result that's bound to keep shareholders happy. That's a impressive gain of 61%.
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. The music to the ears of Hock Lian Seng Holdings shareholders is that EBIT margins have grown from 3.5% to 8.4% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
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.
Since Hock Lian Seng Holdings is no giant, with a market capitalisation of S$169m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Hock Lian Seng Holdings Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Hock Lian Seng Holdings insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 77%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have S$130m invested in the business, at the current share price. So there's plenty there to keep them focused!