Here's Why We Think Bethel Automotive Safety Systems (SHSE:603596) Might Deserve Your Attention Today

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Bethel Automotive Safety Systems (SHSE:603596). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bethel Automotive Safety Systems with the means to add long-term value to shareholders.

See our latest analysis for Bethel Automotive Safety Systems

How Fast Is Bethel Automotive Safety Systems Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, Bethel Automotive Safety Systems has grown EPS by 24% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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 Bethel Automotive Safety Systems' 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 Bethel Automotive Safety Systems 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¥8.9b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Bethel Automotive Safety Systems' future EPS 100% free.

Are Bethel Automotive Safety Systems Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥37b company like Bethel Automotive Safety Systems. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth CN¥7.5b. This totals to 20% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Bethel Automotive Safety Systems, with market caps between CN¥29b and CN¥87b, is around CN¥1.8m.

Bethel Automotive Safety Systems' CEO took home a total compensation package worth CN¥1.6m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Bethel Automotive Safety Systems To Your Watchlist?

For growth investors, Bethel Automotive Safety Systems' raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Bethel Automotive Safety Systems look rather interesting indeed. Before you take the next step you should know about the 1 warning sign for Bethel Automotive Safety Systems that we have uncovered.

Although Bethel Automotive Safety Systems 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.