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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Zengame Technology Holding (HKG:2660), which has not only revenues, but also profits. 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.
How Quickly Is Zengame Technology Holding Increasing Earnings Per Share?
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. Zengame Technology Holding's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 57%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. The good news is that Zengame Technology Holding is growing revenues, and EBIT margins improved by 3.4 percentage points to 42%, over the last year. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
SEHK:2660 Earnings and Revenue History March 22nd 2024
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Zengame Technology Holding Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Zengame Technology Holding insiders own a meaningful share of the business. Indeed, with a collective holding of 69%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. That level of investment from insiders is nothing to sneeze at.
Is Zengame Technology Holding Worth Keeping An Eye On?
Zengame Technology Holding's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Zengame Technology Holding is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Zengame Technology Holding , and understanding these should be part of your investment process.
Although Zengame Technology Holding certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Hong Kong companies that not only boast of strong growth but have also seen recent insider buying..
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
投資家はしばしば「次なるビッグなもの」を発見するという考えに導かれ、「ストーリーストック」と呼ばれる売上高さえない企業の株式を買うことさえあります。しかしながら、Peter Lynchが『株式投資法―売買の技術―』(原題One Up On Wall Street)の中で言ったように、「ほとんどいつも大穴は払い戻しがありません。」負けている企業は資本を吸収してしまう可能性があるため、投資家は良いお金を悪いものに使わないよう注意すべきです。とは対照的に、多くの投資家は、売上高と利益を持つゼンゲーム(Zengame Technology Holding (HKG:2660))のような企業に焦点を当てたいと考えています。これはそれが割安化しているかどうかについて必ずしも語っているわけではありませんが、事業の収益性が賞賛に値するほど高まっているのです。ゼンゲームテクノロジーホールディング(Zengame Technology Holding)の利益率急増の速度はどのくらいですか?
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。