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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Sun.King Power Electronics Group (HKG:580). While profit is not necessarily a social good, it's easy to admire a business that 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.
See our latest analysis for Sun.King Power Electronics Group
Sun.King Power Electronics Group's Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Sun.King Power Electronics Group has managed to grow EPS by 29% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Sun.King Power Electronics Group's EBIT margins were flat over the last year, revenue grew by a solid 14% to CN¥1.3b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Sun.King Power Electronics Group isn't a huge company, given its market capitalization of HK$1.8b. That makes it extra important to check on its balance sheet strength.
Are Sun.King Power Electronics Group 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. As a result, I'm encouraged by the fact that insiders own Sun.King Power Electronics Group shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at CN¥430m, they have plenty of motivation to push the business to succeed. That holding amounts to 23% of the stock on issue, thus making insiders influential, and aligned, owners of the business.