Yahoo Finance Here's Why We Think eCargo Holdings (ASX:ECG) Is Well Worth Watching
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like eCargo Holdings (ASX:ECG). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for eCargo Holdings
eCargo Holdings' Improving Profits
Over the last three years, eCargo Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. eCargo Holdings has grown its trailing twelve month EPS from HK$0.0077 to HK$0.0082, in the last year. That's a fair increase of 7.2%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for eCargo Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 50% to HK$188m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
eCargo Holdings isn't a huge company, given its market capitalisation of AU$19m. That makes it extra important to check on its balance sheet strength.
Are eCargo Holdings Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
One positive for eCargo Holdings, is that company insiders spent HK$12k acquiring shares in the last year. While this isn't much, we also note an absence of sales. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Yuming Zou for AU$4.9k worth of shares, at about AU$0.033 per share.
Should You Add eCargo Holdings To Your Watchlist?
One important encouraging feature of eCargo Holdings is that it is growing profits. Not every business can grow its EPS, but eCargo Holdings certainly can. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. We should say that we've discovered 3 warning signs for eCargo Holdings (2 shouldn't be ignored!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of eCargo Holdings, you'll probably love this curated collection of companies in AU that have witnessed growth alongside 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
