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華爾街日報Is Now The Time To Put Bank of East Asia (HKG:23) On Your Watchlist?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 Bank of East Asia (HKG:23). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Bank of East Asia's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Bank of East Asia managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Our analysis has highlighted that Bank of East Asia's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Bank of East Asia remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.6% to HK$16b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
View our latest analysis for Bank of East Asia
Fortunately, we've got access to analyst forecasts of Bank of East Asia's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Bank of East Asia 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.
Although we did see some insider selling (worth HK$5.8m) this was overshadowed by a mountain of buying, totalling HK$509m in just one year. This adds to the interest in Bank of East Asia because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Executive Chairman Kwok-Po Li who made the biggest single purchase, worth HK$432m, paying HK$9.64 per share.
Along with the insider buying, another encouraging sign for Bank of East Asia is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth HK$3.5b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Is Bank of East Asia Worth Keeping An Eye On?
As previously touched on, Bank of East Asia is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It is worth noting though that we have found 1 warning sign for Bank of East Asia that you need to take into consideration.
Keen growth investors love to see insider activity. Thankfully, Bank of East Asia 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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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.