Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 L.K. Technology Holdings (HKG:558). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for L.K. Technology Holdings

How Quickly Is L.K. Technology Holdings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. L.K. Technology Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 46%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note L.K. Technology Holdings achieved similar EBIT margins to last year, revenue grew by a solid 33% to HK$5.4b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for L.K. Technology Holdings?

Are L.K. Technology Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One gleaming positive for L.K. Technology Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, the Executive Chairperson, Siw Yin Chong, accumulated HK$10m worth of shares at a price of HK$10.27. It doesn't get much better than that, in terms of large investments from insiders.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for L.K. Technology Holdings will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 62%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. And their holding is extremely valuable at the current share price, totalling HK$12b. This is an incredible endorsement from them.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Zhuo Ming Liu is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to L.K. Technology Holdings, with market caps between HK$7.8b and HK$25b, is around HK$4.2m.

L.K. Technology Holdings' CEO took home a total compensation package of HK$1.4m in the year prior to March 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does L.K. Technology Holdings Deserve A Spot On Your Watchlist?

L.K. Technology Holdings' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest L.K. Technology Holdings belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for L.K. Technology Holdings you should be aware of, and 1 of them is a bit unpleasant.

Keen growth investors love to see insider buying. Thankfully, L.K. Technology Holdings 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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 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.