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Do Fineland Real Estate Services Group's (HKG:8376) Earnings Warrant Your Attention?

Simply Wall St

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Fineland Real Estate Services Group (HKG:8376). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

Check out our latest analysis for Fineland Real Estate Services Group

How Fast Is Fineland Real Estate Services Group Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Like a firecracker arcing through the night sky, Fineland Real Estate Services Group's EPS shot from CN¥0.038 to CN¥0.087, over the last year. You don't see 128% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Fineland Real Estate Services Group shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

SEHK:8376 Income Statement, November 24th 2019

Since Fineland Real Estate Services Group is no giant, with a market capitalization of HK$248m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Fineland Real Estate Services Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for Fineland Real Estate Services Group shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Haiming Rong, the CEO & Executive Director of the company, paid CN¥187k for shares at around CN¥0.37 each.

It's me that Fineland Real Estate Services Group insiders are buying the stock, but that's not the only reason to think leader are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. I discovered that the median total compensation for the CEOs of companies like Fineland Real Estate Services Group with market caps under CN¥1.4b is about CN¥1.5m.

Fineland Real Estate Services Group offered total compensation worth CN¥1.2m to its CEO in the year to December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Fineland Real Estate Services Group Deserve A Spot On Your Watchlist?

Fineland Real Estate Services Group's earnings have taken off like any random crypto-currency did, back in 2017. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Fineland Real Estate Services Group may be at an inflection point. If so, then it the potential for further gains probably merit a spot on your watchlist. Now, you could try to make up your mind on Fineland Real Estate Services Group 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 are plenty of other companies that have insiders buying up shares. So if you like the sound of Fineland Real Estate Services Group, you'll probably love this free list of growing companies that insiders are buying.

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.