Is now the time to add Yusei Holdings (HKG:96) to your watchlist?

Investors are often driven by the idea of ​​discovering “the next big thing,” even if that means buying “story stocks” that have no revenue or even profit. Sometimes these stories can cloud investors’ minds and cause them to invest based on their emotions rather than the company’s strong fundamentals. Loss-making companies are in a race against time to achieve financial sustainability, so investors in these companies may take more risk than they should.

Although we are in the era of high-sky investing in technology stocks, many investors still follow a more traditional strategy. They buy shares of profitable companies such as Yusei Holdings (HKG:96). Although profit is not the only metric to consider when investing, it is worth identifying companies that can generate it consistently.

Check out our latest analysis for Yusei Holdings

How quickly does Yusei Holdings grow earnings per share?

Generally speaking, companies that are growing earnings per share (EPS) should show similar trends in share price. Therefore, it makes sense for experienced investors to pay close attention to earnings per share when analyzing investments. Yusei Holdings has been able to grow earnings per share at a rate of 15% per year over three years. This growth rate is pretty good, assuming the company can sustain it.

Revenue growth is a good indicator of sustainable growth and when combined with a high earnings before interest and tax (EBIT) margin, it is a great way for a company to maintain its competitive advantage in the market. While we note that Yusei Holdings achieved similar EBIT margins to last year, revenue grew by a solid 10% to CN¥1.9 billion. This is encouraging news for the company!

In the graph below you can see how the company has grown profit and revenue over time. Click on the graph to see the exact numbers.

Yusei Holdings is not a huge company, with a market capitalization of HK$439 million, so it is especially important to check the strength of its balance sheet.

Are Yusei Holdings insiders on the same page as all shareholders?

Many consider high insider ownership to be a strong sign of alignment between company leaders and ordinary shareholders. So, as you can imagine, the fact that insiders own a significant number of shares at Yusei Holdings is quite attractive. With 41% of the company, insiders have a lot riding on the share price’s performance. Those who feel reassured by such a solid insider ownership should be happy, as it implies that those in charge of the company are truly motivated to grow value for shareholders. To give you an idea, the value of insider ownership in the company is estimated at CNY181 million at the current share price, so there’s plenty to keep them focused!

It means a lot when insiders invest in the company, but shareholders may wonder if the compensation policy is in their best interest. Well, based on CEO compensation, one could argue that this is indeed the case. Our analysis has found that the average total compensation for the CEOs of companies like Yusei Holdings with a market capitalization under CNY1.4 billion is about CNY1.7 million.

Yusei Holdings offered its CEO total compensation of CNY1.2 million for the year ending December 2023. That seems pretty reasonable, especially considering it’s below average for similarly sized companies. A CEO’s compensation is far from the most important aspect of a company, but when it’s reasonable, that gives a little more confidence that management has shareholders’ interests in mind. More broadly, it can also be a sign of a culture of integrity.

Is Yusei Holdings worth keeping an eye on?

As mentioned, Yusei Holdings is a growing company, which is encouraging. Earnings per share growth may be the most eye-catching headline for Yusei Holdings, but there’s more that will make shareholders happy. With company insiders heavily invested in the company’s success and CEO compensation modest, there’s no argument that this stock is worth looking into. Before you get too excited, though, here’s what we found: 4 warning signs for Yusei Holdings (3 don’t suit us!) that you should know.

While it may be worth investing in stocks without growing earnings and without insider buying, for investors who value these key metrics, here is a carefully curated list of Hong Kong companies with promising growth potential and insider confidence.

Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.