Here's Why We Think Alibaba Health Information Technology (HKG:241) Is Well Worth Watching

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

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 Alibaba Health Information Technology (HKG:241). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Alibaba Health Information Technology with the means to add long-term value to shareholders.

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Alibaba Health Information Technology's Improving Profits

In the last three years Alibaba Health Information Technology's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Alibaba Health Information Technology's EPS shot up from CN¥0.079 to CN¥0.12; a result that's bound to keep shareholders happy. That's a impressive gain of 52%.

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. EBIT margins for Alibaba Health Information Technology remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to CN¥33b. That's progress.

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

See our latest analysis for Alibaba Health Information Technology

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Alibaba Health Information Technology's forecast profits?

Are Alibaba Health Information Technology Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$86b company like Alibaba Health Information Technology. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth CN¥17b. Coming in at 19% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Does Alibaba Health Information Technology Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Alibaba Health Information Technology's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Now, you could try to make up your mind on Alibaba Health Information Technology 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.