Kuaishou Technology (HKG:1024) Ticks All The Boxes When It Comes To Earnings Growth
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Kuaishou Technology (HKG:1024). 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.
How Fast Is Kuaishou Technology Growing Its Earnings Per Share?
Over the last three years, Kuaishou Technology has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Kuaishou Technology's EPS has risen over the last 12 months, growing from CN¥3.47 to CN¥4.03. This amounts to a 16% gain; a figure that shareholders will be pleased to see.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Kuaishou Technology remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to CN¥139b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Check out our latest analysis for Kuaishou Technology
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Kuaishou Technology's future EPS 100% free.
Are Kuaishou Technology Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a HK$278b company like Kuaishou Technology. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥54b. Coming in at 19% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.
Does Kuaishou Technology Deserve A Spot On Your Watchlist?
As previously touched on, Kuaishou Technology is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. Of course, just because Kuaishou Technology is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Although Kuaishou Technology certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Hong Kong companies that not only boast of strong growth but have strong insider backing.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.