If EPS Growth Is Important To You, Jiangsu Xinquan Automotive TrimLtd (SHSE:603179) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 Jiangsu Xinquan Automotive TrimLtd (SHSE:603179). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jiangsu Xinquan Automotive TrimLtd with the means to add long-term value to shareholders.

See our latest analysis for Jiangsu Xinquan Automotive TrimLtd

How Quickly Is Jiangsu Xinquan Automotive TrimLtd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Jiangsu Xinquan Automotive TrimLtd's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 49%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. It's noted that Jiangsu Xinquan Automotive TrimLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Jiangsu Xinquan Automotive TrimLtd maintained stable EBIT margins over the last year, all while growing revenue 35% to CN¥13b. That's progress.

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.

Fortunately, we've got access to analyst forecasts of Jiangsu Xinquan Automotive TrimLtd's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Jiangsu Xinquan Automotive TrimLtd 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 Jiangsu Xinquan Automotive TrimLtd insiders own a significant number of shares certainly is appealing. Owning 39% of the company, insiders have plenty riding on the performance of the the share price. 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. And their holding is extremely valuable at the current share price, totalling CN¥10b. This is an incredible endorsement from them.

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¥15b and CN¥46b, like Jiangsu Xinquan Automotive TrimLtd, the median CEO pay is around CN¥1.5m.

The Jiangsu Xinquan Automotive TrimLtd CEO received total compensation of just CN¥607k in the year to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of a culture of integrity, in a broader sense.

Is Jiangsu Xinquan Automotive TrimLtd Worth Keeping An Eye On?

Jiangsu Xinquan Automotive TrimLtd's earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Jiangsu Xinquan Automotive TrimLtd is worth considering carefully. It is worth noting though that we have found 2 warning signs for Jiangsu Xinquan Automotive TrimLtd (1 is significant!) that you need to take into consideration.

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 Chinese 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.

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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.