We Ran A Stock Scan For Earnings Growth And Changzhou Xingyu Automotive Lighting SystemsLtd (SHSE:601799) Passed With Ease

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Changzhou Xingyu Automotive Lighting SystemsLtd (SHSE:601799). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Changzhou Xingyu Automotive Lighting SystemsLtd with the means to add long-term value to shareholders.

View our latest analysis for Changzhou Xingyu Automotive Lighting SystemsLtd

Changzhou Xingyu Automotive Lighting SystemsLtd's Improving Profits

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Changzhou Xingyu Automotive Lighting SystemsLtd's EPS shot up from CN¥3.40 to CN¥4.54; a result that's bound to keep shareholders happy. That's a commendable gain of 33%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Changzhou Xingyu Automotive Lighting SystemsLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Changzhou Xingyu Automotive Lighting SystemsLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 29% to CN¥12b. That's encouraging news for the company!

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

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 Changzhou Xingyu Automotive Lighting SystemsLtd?

Are Changzhou Xingyu Automotive Lighting SystemsLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Changzhou Xingyu Automotive Lighting SystemsLtd insiders own a meaningful share of the business. In fact, they own 48% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. CN¥18b That level of investment from insiders is nothing to sneeze at.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between CN¥29b and CN¥88b, like Changzhou Xingyu Automotive Lighting SystemsLtd, the median CEO pay is around CN¥1.8m.

Changzhou Xingyu Automotive Lighting SystemsLtd offered total compensation worth CN¥1.1m to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Changzhou Xingyu Automotive Lighting SystemsLtd Deserve A Spot On Your Watchlist?

For growth investors, Changzhou Xingyu Automotive Lighting SystemsLtd's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the key takeaway is that Changzhou Xingyu Automotive Lighting SystemsLtd is worth keeping an eye on. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Changzhou Xingyu Automotive Lighting SystemsLtd is trading on a high P/E or a low P/E, relative to its industry.

Although Changzhou Xingyu Automotive Lighting SystemsLtd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.