Does Zhejiang Songyuan Automotive Safety SystemsLtd (SZSE:300893) Deserve A Spot On Your Watchlist?

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

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Zhejiang Songyuan Automotive Safety SystemsLtd (SZSE:300893). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Zhejiang Songyuan Automotive Safety SystemsLtd

Zhejiang Songyuan Automotive Safety SystemsLtd's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Zhejiang Songyuan Automotive Safety SystemsLtd has grown EPS by 31% 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.

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. Not all of Zhejiang Songyuan Automotive Safety SystemsLtd's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that Zhejiang Songyuan Automotive Safety SystemsLtd is growing revenues, and EBIT margins improved by 3.5 percentage points to 18%, over the last year. 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. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Zhejiang Songyuan Automotive Safety SystemsLtd's future profits.

Are Zhejiang Songyuan Automotive Safety SystemsLtd 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 those who are interested in Zhejiang Songyuan Automotive Safety SystemsLtd will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 67% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. This insider holding amounts to This is an incredible endorsement from them.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Zhejiang Songyuan Automotive Safety SystemsLtd, with market caps between CN¥2.8b and CN¥11b, is around CN¥1.0m.

The Zhejiang Songyuan Automotive Safety SystemsLtd CEO received CN¥507k in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.

Does Zhejiang Songyuan Automotive Safety SystemsLtd Deserve A Spot On Your Watchlist?

For growth investors, Zhejiang Songyuan Automotive Safety SystemsLtd's 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. The overarching message here is that Zhejiang Songyuan Automotive Safety SystemsLtd has underlying strengths that make it worth a look at. Even so, be aware that Zhejiang Songyuan Automotive Safety SystemsLtd is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

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.