For beginners, it can 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 profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Hock Lian Seng Holdings (SGX:J2T). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hock Lian Seng Holdings with the means to add long-term value to shareholders.

Check out our latest analysis for Hock Lian Seng Holdings

Hock Lian Seng Holdings' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Hock Lian Seng Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 53%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. This approach makes Hock Lian Seng Holdings look pretty good, on balance; although revenue is flattish, EBIT margins improved from 3.8% to 15% in the last year. That's something to smile about.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

SGX:J2T Earnings and Revenue History January 23rd 2025

Since Hock Lian Seng Holdings is no giant, with a market capitalisation of S$197m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Hock Lian Seng Holdings 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 Hock Lian Seng Holdings insiders own a meaningful share of the business. In fact, they own 76% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at S$150m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Hock Lian Seng Holdings To Your Watchlist?

Hock Lian Seng Holdings' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Hock Lian Seng Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 1 warning sign for Hock Lian Seng Holdings you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Singaporean companies which have demonstrated growth backed by significant insider holdings.

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

Valuation is complex, but we're here to simplify it.

Discover if Hock Lian Seng Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.