Here's Why I Think Shirble Department Store Holdings (China) (HKG:312) Is An Interesting Stock
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 as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Shirble Department Store Holdings (China) (HKG:312). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
See our latest analysis for Shirble Department Store Holdings (China)
How Fast Is Shirble Department Store Holdings (China) Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Shirble Department Store Holdings (China) has managed to grow EPS by 21% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Shirble Department Store Holdings (China)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Unfortunately, Shirble Department Store Holdings (China)'s revenue dropped 34% last year, but the silver lining is that EBIT margins improved from 3.2% to 30%. That's not ideal.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
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 Shirble Department Store Holdings (China)'s balance sheet strength, before getting too excited.
Are Shirble Department Store Holdings (China) Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
One gleaming positive for Shirble Department Store Holdings (China), in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction Co-Chairman Xiangbo Yang paid HK$35m, for stock at HK$1.53 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Shirble Department Store Holdings (China) insiders own more than a third of the company. In fact, they own 71% 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. At the current share price, that insider holding is worth a whopping CN¥2.8b. That means they have plenty of their own capital riding on the performance of the business!
Is Shirble Department Store Holdings (China) Worth Keeping An Eye On?
You can't deny that Shirble Department Store Holdings (China) has grown its earnings per share at a very impressive rate. That's attractive. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. Now, you could try to make up your mind on Shirble Department Store Holdings (China) by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
As a growth investor I do like to see insider buying. But Shirble Department Store Holdings (China) isn't the only one. You can see a a free list of them here.
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.
