I Ran A Stock Scan For Earnings Growth And Xtep International Holdings (HKG:1368) Passed With Ease
In This Article:
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Xtep International Holdings (HKG:1368). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Xtep International Holdings
Xtep International Holdings's Improving Profits
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, Xtep International Holdings's EPS soared from CN¥0.22 to CN¥0.33, in just one year. That's a commendable gain of 51%.
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. While we note Xtep International Holdings's EBIT margins were flat over the last year, revenue grew by a solid 27% to CN¥7.0b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Xtep International Holdings.
Are Xtep 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
One shining light for Xtep International Holdings is the serious outlay one insider has made to buy shares, in the last year. Specifically, in one large transaction Founder Shui Ding paid HK$9.7m, for stock at HK$4.84 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.