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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Hor Kew (SGX:BBP). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Hor Kew
How Fast Is Hor Kew Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Hor Kew managed to grow EPS by 16% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. Hor Kew's EBIT margins have actually improved by 7.8 percentage points in the last year, to reach 8.0%, but, on the flip side, revenue was down 6.6%. That's not a good look.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Since Hor Kew is no giant, with a market capitalisation of S$23m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Hor Kew Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Hor Kew insiders own a meaningful share of the business. Owning 43% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only S$23m Hor Kew is really small for a listed company. So despite a large proportional holding, insiders only have S$9.9m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.