Should You Be Adding Jiangsu Yunyi ElectricLtd (SZSE:300304) To Your Watchlist Today?

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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Jiangsu Yunyi ElectricLtd (SZSE:300304). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Jiangsu Yunyi ElectricLtd

How Quickly Is Jiangsu Yunyi ElectricLtd Increasing Earnings Per Share?

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. Jiangsu Yunyi ElectricLtd managed to grow EPS by 16% per year, over three years. That's a good rate of growth, if it can be sustained.

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. It's noted that Jiangsu Yunyi ElectricLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Jiangsu Yunyi ElectricLtd shareholders can take confidence from the fact that EBIT margins are up from 11% to 18%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Jiangsu Yunyi ElectricLtd's balance sheet strength, before getting too excited.

Are Jiangsu Yunyi ElectricLtd 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. Jiangsu Yunyi ElectricLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold CN¥190m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 3.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

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 Jiangsu Yunyi ElectricLtd, with market caps between CN¥2.9b and CN¥12b, is around CN¥1.1m.

Jiangsu Yunyi ElectricLtd's CEO took home a total compensation package worth CN¥960k in the year leading up 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.

Should You Add Jiangsu Yunyi ElectricLtd To Your Watchlist?

As previously touched on, Jiangsu Yunyi ElectricLtd is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Jiangsu Yunyi ElectricLtd, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Even so, be aware that Jiangsu Yunyi ElectricLtd is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

Although Jiangsu Yunyi ElectricLtd 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.

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