If EPS Growth Is Important To You, Tongcheng Travel Holdings (HKG:780) Presents An Opportunity

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Tongcheng Travel Holdings (HKG:780). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Tongcheng Travel Holdings Growing Its Earnings Per Share?

Tongcheng Travel Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Tongcheng Travel Holdings' EPS shot up from CN¥0.85 to CN¥1.14; a result that's bound to keep shareholders happy. That's a fantastic gain of 34%.

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. Tongcheng Travel Holdings shareholders can take confidence from the fact that EBIT margins are up from 13% to 17%, and revenue is growing. That's great to see, on both counts.

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.

See our latest analysis for Tongcheng Travel Holdings

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Tongcheng Travel Holdings' forecast profits?

Are Tongcheng Travel Holdings Insiders Aligned With All Shareholders?

Owing to the size of Tongcheng Travel Holdings, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. With a whopping CN¥655m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.

Is Tongcheng Travel Holdings Worth Keeping An Eye On?

For growth investors, Tongcheng Travel Holdings' raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Tongcheng Travel Holdings' continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Now, you could try to make up your mind on Tongcheng Travel Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Hong Kong companies which have demonstrated growth backed by significant insider holdings.

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.