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Should You Be Adding Techtronic Industries (HKG:669) To Your Watchlist Today?

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Simply Wall St
·3 min read
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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 completely 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.

In contrast to all that, I prefer to spend time on companies like Techtronic Industries (HKG:669), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Techtronic Industries

How Quickly Is Techtronic Industries Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Over the last three years, Techtronic Industries has grown EPS by 15% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Techtronic Industries's EBIT margins were flat over the last year, revenue grew by a solid 9.2% to US$7.7b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

SEHK:669 Income Statement May 20th 2020
SEHK:669 Income Statement May 20th 2020

Fortunately, we've got access to analyst forecasts of Techtronic Industries's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Techtronic Industries Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$117b company like Techtronic Industries. But we are reassured by the fact they have invested in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$30b. Coming in at 25% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Is Techtronic Industries Worth Keeping An Eye On?

One important encouraging feature of Techtronic Industries is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Still, you should learn about the 2 warning signs we've spotted with Techtronic Industries .

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

This article by Simply Wall St is general in nature. 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. Thank you for reading.