Here's why Old Chang Kee (Catalist: 5ML) caught investors' attention

For beginners, it may seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profits. Unfortunately, these high-risk investments are often unlikely to be profitable, and many investors pay the price to learn their lesson. Loss-making companies are always racing against time to reach financial viability, so investors in these companies may take on more risk than they should.

If this type of business is not your style, and you like businesses that generate revenue, or even profit, then you may well be interested in Old Chang Kee (Catalist: 5ML). Although profit is not the only metric to consider when investing, it is worth recognizing companies that can produce it consistently.

Check out our latest analysis for Old Chang Kee

How fast is Old Chang Kee growing its earnings per share?

Even with very modest growth rates, a company will generally do well if it improves its earnings per share (EPS) year after year. So it’s easy to see why many investors focus on EPS growth. Old Chang Kee’s EPS rose from S$0.051 to S$0.08 in just one year; a result that is sure to make shareholders smile. This represents a commendable gain of 57%.

It’s often useful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another view of the quality of the company’s growth. Old Chang Kee shareholders can take comfort in the fact that EBIT margins have increased from 7.6% to 11% and revenue is growing. It’s great to see, on both counts.

In the chart below, you can see how the company has grown its profits and revenue over time. For more details, click on the image.

Old Chang Kee is not a big company, considering its market capitalization of S$89 million. It is therefore particularly important to check the strength of your balance sheet.

Are Old Chang Kee insiders aligned with all shareholders?

Many consider a high rate of insider ownership to be a strong sign of alignment between a company’s management and common shareholders. So, those interested in Old Chang Kee will be pleased to know that insiders have shown their confidence, owning a large portion of the company’s shares. To be exact, company insiders own 76% of the company, so their decisions have a significant impact on their investments. This clearly shows that they will be incentivized to plan for the long term, which is positive for shareholders with a sit and hold strategy. In absolute terms, insiders have S$68 million invested in the company, at the current share price. It’s nothing to sneeze at!

Should you add old Chang Kee to your watchlist?

If you believe that share price follows earnings per share, you should definitely dig deeper into Old Chang Kee’s strong EPS growth. Additionally, the high level of insider ownership is impressive and suggests that management appreciates EPS growth and has confidence in Old Chang Kee’s continued strength. On all its merits, solid EPS growth and shareholder-aligned company insiders would indicate that a company is worth further research. Before you move on to the next step, you need to know 2 Warning Signs for Old Chang Kee that we discovered.

It is still possible to succeed by buying stocks that are not growing income and not have insiders buying shares. But for those who consider these parameters important, we encourage you to consult companies that TO DO have these characteristics. You can access a personalized list of Singapore companies that have demonstrated growth supported by significant insider holdings.

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

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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