Here's Why ICO Group (HKG:1460) Has Caught The Eye Of Investors

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.

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 ICO Group (HKG:1460). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ICO Group with the means to add long-term value to shareholders.

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How Fast Is ICO Group Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that ICO Group has grown EPS by 38% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note ICO Group achieved similar EBIT margins to last year, revenue grew by a solid 4.7% to HK$1.2b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

View our latest analysis for ICO Group

ICO Group isn't a huge company, given its market capitalisation of HK$233m. That makes it extra important to check on its balance sheet strength.

Are ICO Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First and foremost; there we saw no insiders sell ICO Group shares in the last year. But the important part is that company insider Chiu Fai Choi spent HK$2.6m buying stock, at an average price of HK$0.36. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for ICO Group will reveal that insiders own a significant piece of the pie. Owning 43% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Although, with ICO Group being valued at HK$233m, this is a small company we're talking about. That means insiders only have HK$100m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does ICO Group Deserve A Spot On Your Watchlist?

ICO Group's earnings per share have been soaring, with growth rates sky high. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe ICO Group deserves timely attention. We should say that we've discovered 2 warning signs for ICO Group (1 is significant!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of ICO Group, you'll probably love this curated collection of companies in HK that have an attractive valuation alongside insider buying in the last three months.

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.