With EPS Growth And More, China Water Affairs Group (HKG: 855) is interesting
It’s only natural that many investors, especially those new to the game, prefer to buy stocks in “sexy” stocks with a good history, even if those companies are losing money. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses.
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like China Water Business Group (HKG:855). Even if stocks are fully valued today, most capitalists would recognize its earnings as a demonstration of consistent value generation. Conversely, a loss-making business has yet to prove itself with profits, and eventually the sweet milk of outside capital can turn sour.
See our latest analysis for China Water Affairs Group
Earnings per share of China Water Affairs Group increase.
The market is a short-term voting machine, but a long-term weighing machine, so stock price eventually follows earnings per share (EPS). This makes EPS growth an attractive quality for any business. We can see that over the past three years, China Water Affairs Group has increased its EPS by 14% per year. This growth rate is quite good, assuming the company can sustain it.
One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. While we note that China Water Affairs Group’s EBIT margins have remained stable over the past year, revenues have increased by 23% to HK$12 billion. This is a real plus point.
You can check the company’s revenue and profit growth trend in the table below. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. To that end, right now and today, you can check out our China Water Affairs Group EPS Future EPS Visualization from Consensus Analysts 100% Free.
Are China Water Affairs Group insiders aligned with all shareholders?
Like kids on the street standing up for what they believe in, insider stock buying gives me reason to believe in a better future. This view is based on the possibility that stock purchases signal an uptrend on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
First of all; I did not see any insiders selling shares of China Water Affairs Group last year. Better yet, however, Executive Chairman Chuan Liang Duan bought HK$1.6 million worth of shares, paying around HK$10.38 per share, on average. Big purchases like this give me a sense of opportunity; Action speaks louder than words.
In addition to insider buying, it’s good to see that China Water Affairs Group insiders have a valuable investment in the company. Indeed, they have invested a mountain of glittering wealth there, currently valued at HK$4.6 billion. Representing 33% of the business, this stake gives insiders plenty of leverage and plenty of reasons to drive shareholder value. Very encouraging.
Is China’s Water Business Group Worth Watching?
An important and encouraging feature of the China Water Affairs Group is its profit growth. On top of that, we’ve seen insiders buy stocks even if they already have a lot. That makes the company a prime candidate for my watchlist — and arguably a search priority. Again, the ubiquitous specter of investment risk must be taken into account. We have identified 3 warning signs with China Water Affairs Group (at least 1, which is significant), and understanding them should be part of your investment process.
The good news is that China Water Affairs Group isn’t the only growth stock to buy insiders. Here’s a list…with insider purchases over the past three months!
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.