Here’s Why We Think JH Educational Technology (HKG:1935) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone 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.

So if you’re like me, you might be more interested in profitable, growing companies, like JH Educational Technology (HKG:1935). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for JH Educational Technology

How Fast Is JH Educational Technology Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, JH Educational Technology’s EPS soared from CN¥0.12 to CN¥0.17, in just one year. That’s a impressive gain of 34%.

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. The good news is that JH Educational Technology is growing revenues, and EBIT margins improved by 10.2 percentage points to 51%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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 JH Educational Technology’s balance sheet strength, before getting too excited.

Are JH Educational Technology Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we’re pleased to report that JH Educational Technology insiders own a meaningful share of the business. Indeed, with a collective holding of 75%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term – something I like to see. At the current share price, that insider holding is worth a whopping CN¥4.1b. Now that’s what I call some serious skin in the game!

Should You Add JH Educational Technology To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about JH Educational Technology’s strong EPS growth. I think that EPS growth is something to boast of, and it doesn’t surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. It is worth noting though that we have found 2 warning signs for JH Educational Technology that you need to take into consideration.

Although JH Educational Technology certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.

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. 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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