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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. 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 HiTech Group Australia (ASX:HIT), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is HiTech Group Australia Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years HiTech Group Australia grew its EPS by 10% 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. HiTech Group Australia maintained stable EBIT margins over the last year, all while growing revenue 10% to AU$33m. 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.
Since HiTech Group Australia is no giant, with a market capitalization of AU$76m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are HiTech Group Australia Insiders Aligned With All Shareholders?
Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that HiTech Group Australia insiders own a meaningful share of the business. In fact, they own 75% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have AU$57m invested in the business, using the current share price. That's nothing to sneeze at!
Does HiTech Group Australia Deserve A Spot On Your Watchlist?
As I already mentioned, HiTech Group Australia is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for HiTech Group Australia that you should be aware of.
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.
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.
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