Here's Why We Think HiTech Group Australia (ASX:HIT) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 HiTech Group Australia (ASX:HIT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide HiTech Group Australia with the means to add long-term value to shareholders.

Check out our latest analysis for HiTech Group Australia

HiTech Group Australia's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years HiTech Group Australia grew its EPS by 14% per year. That's a good rate of growth, if it can be sustained.

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. HiTech Group Australia maintained stable EBIT margins over the last year, all while growing revenue 18% to AU$74m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since HiTech Group Australia is no giant, with a market capitalisation of AU$89m, you should definitely check its cash and debt before getting too excited about its prospects.

Are HiTech Group Australia Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that HiTech Group Australia insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 73%, 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. With that sort of holding, insiders have about AU$65m riding on the stock, at current prices. That's nothing to sneeze at!

Does HiTech Group Australia Deserve A Spot On Your Watchlist?

As previously touched on, HiTech Group Australia is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - HiTech Group Australia has 2 warning signs we think you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in AU with promising growth potential and insider confidence.

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.