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Does BBMG (HKG:2009) Deserve A Spot On Your Watchlist?

Simply Wall St

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like BBMG (HKG:2009), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for BBMG

BBMG's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, BBMG has grown EPS by 7.4% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

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 BBMG's EBIT margins were flat over the last year, revenue grew by a solid 28% to CN¥94b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

SEHK:2009 Income Statement, January 2nd 2020

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

Are BBMG Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$41b company like BBMG. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth CN¥830m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is BBMG Worth Keeping An Eye On?

As I already mentioned, BBMG is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Now, you could try to make up your mind on BBMG by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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

If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.