Is Now The Time To Put Yutong BusLtd (SHSE:600066) On Your Watchlist?

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. 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 Yutong BusLtd (SHSE:600066). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Yutong BusLtd with the means to add long-term value to shareholders.

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Yutong BusLtd's Improving Profits

Yutong BusLtd has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Impressively, Yutong BusLtd's EPS catapulted from CN¥0.74 to CN¥1.44, over the last year. It's not often a company can achieve year-on-year growth of 96%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Yutong BusLtd'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. Yutong BusLtd shareholders can take confidence from the fact that EBIT margins are up from 4.8% to 11%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

See our latest analysis for Yutong BusLtd

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Yutong BusLtd's forecast profits?

Are Yutong BusLtd Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥58b company like Yutong BusLtd. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. With a whopping CN¥671m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Is Yutong BusLtd Worth Keeping An Eye On?

Yutong BusLtd's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Yutong BusLtd very closely. We don't want to rain on the parade too much, but we did also find 1 warning sign for Yutong BusLtd that you need to be mindful of.

Although Yutong BusLtd 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.