Here’s why I think Orient Overseas (International) (HKG: 316) is an interesting stock

Like a puppy chasing its tail, some new investors often chase “the next big thing,” even if that means buying “history stocks” with no income, let alone profit. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.

In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like Orient Overseas (International) (HKG: 316). Now, I’m not saying the title is necessarily undervalued today; but I cannot shake an appreciation of the profitability of the company itself. Conversely, a loss-making company has yet to prove itself with profit, and eventually the sweet milk of external capital can turn sour.

Discover our latest analysis for Orient Overseas (International)

How fast is Orient Overseas (International) increasing its earnings per share?

In business, but not in life, profit is a key measure of success; and stock prices tend to reflect earnings per share (EPS). So, like a ray of sunlight through a hole in the clouds, the improvement in EPS is considered a good sign. It is therefore surprising that the EPS of Orient Overseas (International) fell from US $ 0.22 to US $ 5.47 in just one year. When you see profits growing so quickly, it often means good things ahead for the business. Could this be a sign that the company has reached an inflection point?

I like to see top line growth as an indication that growth is sustainable, and I look for a high profit margin before interest and taxes (EBIT) to indicate a competitive gap (although some companies with low margins also have ditches). Orient Overseas (International) shareholders can be confident that EBIT margins are increasing from 3.3% to 31% and revenues are increasing. It’s great to see, on both counts.

You can take a look at the company’s revenue and profit growth trend, in the graph below. Click on the graph to see the exact numbers.

SEHK: 316 Revenue and Revenue History as of December 23, 2021

Of course, the chic is to find stocks that have their best days in the future, not in the past. You can of course base your opinion on past performance but you can also check out this interactive chart of Professional Analyst EPS forecasts for Orient Overseas (International).

Are Orient Overseas (International) insiders aligned with all shareholders?

Given that Orient Overseas (International) has a market cap of HK $ 120 billion, we don’t expect insiders to own a significant percentage of shares. But we are reassured by the fact that they have invested in the company. Indeed, they hold 97 million US dollars of its shares. This shows strong buy-in and may indicate a belief in business strategy. Although it only represents 0.08% of the business, the value of this investment is enough to show that insiders have a lot going on in the business.

Is Orient Overseas (International) worth watching?

Orient Overseas (International) profits took off like any random cryptocurrency, in 2017. This BPA growth certainly has my attention, and the large insider ownership only serves to pique my interest further. Sometimes the rapid growth of BPA is a sign that the business has reached an inflection point; and I like those. So yes, on this short review, I think it’s worth considering Orient Overseas (International) for a place on your watchlist. We don’t want to rain too much on the parade, but we also found 4 warning signs for Orient Overseas (International) (1 shouldn’t be ignored!) That you should be careful about.

You can invest in any business. But if you’d rather focus on stocks that have been the subject of insider buys, here’s a list of companies that have made insider buys in the past three months.

Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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