With EPS Growth And More, Zhejiang VIE Science & Technology (SZSE:002590) Makes An Interesting Case

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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Zhejiang VIE Science & Technology (SZSE:002590). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Zhejiang VIE Science & Technology

Zhejiang VIE Science & Technology's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Zhejiang VIE Science & Technology grew its EPS from CN¥0.16 to CN¥0.71, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Zhejiang VIE Science & Technology shareholders can take confidence from the fact that EBIT margins are up from 0.3% to 3.8%, and revenue is growing. That's great to see, on both counts.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Zhejiang VIE Science & Technology Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Zhejiang VIE Science & Technology insiders have a significant amount of capital invested in the stock. With a whopping CN¥676m worth of shares as a group, insiders have plenty riding on the company's success. At 11% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Zhejiang VIE Science & Technology with market caps between CN¥2.9b and CN¥12b is about CN¥1.1m.

The Zhejiang VIE Science & Technology CEO received CN¥715k in compensation for the year ending 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. It can also be a sign of good governance, more generally.

Should You Add Zhejiang VIE Science & Technology To Your Watchlist?

Zhejiang VIE Science & Technology's earnings per share growth have been climbing higher at an appreciable rate. 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 drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Zhejiang VIE Science & Technology is certainly doing some things right and is well worth investigating. What about risks? Every company has them, and we've spotted 1 warning sign for Zhejiang VIE Science & Technology you should know about.

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 CN 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com