Here's Why Fameglow Holdings (HKG:3774) Has Caught The Eye Of Investors

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Fameglow Holdings (HKG:3774). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Fast Is Fameglow Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Fameglow Holdings has achieved impressive annual EPS growth of 48%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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 Fameglow Holdings achieved similar EBIT margins to last year, revenue grew by a solid 35% to HK$590m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Check out our latest analysis for Fameglow Holdings

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Fameglow Holdings' balance sheet strength, before getting too excited.

Are Fameglow Holdings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One gleaming positive for Fameglow Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, the company insider, Hoi Yuen Man, accumulated HK$350m worth of shares at a price of HK$0.75. It doesn't get much better than that, in terms of large investments from insiders.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Fameglow Holdings will reveal that insiders own a significant piece of the pie. In fact, they own 57% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. At the current share price, that insider holding is worth a staggering HK$14b. That level of investment from insiders is nothing to sneeze at.

Does Fameglow Holdings Deserve A Spot On Your Watchlist?

Fameglow Holdings' earnings per share growth have been climbing higher at an appreciable rate. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Fameglow Holdings belongs near the top of your watchlist. You still need to take note of risks, for example - Fameglow Holdings has 1 warning sign we think you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Fameglow Holdings isn't the only one. You can see a a curated list of Hong Kong companies which have exhibited consistent growth accompanied by high insider ownership.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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