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. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Glory Sun Land Group (HKG:299). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for Glory Sun Land Group
How Fast Is Glory Sun Land Group Growing Its Earnings Per Share?
In the last three years Glory Sun Land Group’s earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn’t tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year’s Eve accelerating into the sky, Glory Sun Land Group’s EPS shot from HK$0.033 to HK$0.082, over the last year. You don’t see 146% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Glory Sun Land Group is growing revenues, and EBIT margins improved by 14.5 percentage points to 17%, over the last year. 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. For finer detail, click on the image.
SEHK:299 Income Statement April 29th 2020
While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Glory Sun Land Group’s balance sheet strength, before getting too excited.
Are Glory Sun Land Group Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
One gleaming positive for Glory Sun Land Group, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, the , Xiaokun Lin, accumulated HK$125m worth of shares around HK$0.45. It doesn’t get much better than that, in terms of large investments from insiders.
On top of the insider buying, it’s good to see that Glory Sun Land Group insiders have a valuable investment in the business. Indeed, they hold HK$196m worth of its stock. That’s a lot of money, and no small incentive to work hard. That amounts to 6.1% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Lingjie Xia is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Glory Sun Land Group with market caps between HK$1.6b and HK$6.2b is about HK$2.6m.
The Glory Sun Land Group CEO received total compensation of just HK$983k in the year to . That’s clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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 good governance, more generally.
Is Glory Sun Land Group Worth Keeping An Eye On?
Glory Sun Land Group’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Glory Sun Land Group deserves timely attention. What about risks? Every company has them, and we’ve spotted 4 warning signs for Glory Sun Land Group (of which 2 can’t be ignored!) you should know about.
The good news is that Glory Sun Land Group is not the only growth stock with insider buying. Here’s a list of them… 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.
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