Here's Why Zhengzhou Coal Mining Machinery Group (SHSE:601717) Has Caught The Eye Of Investors

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Zhengzhou Coal Mining Machinery Group (SHSE:601717). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhengzhou Coal Mining Machinery Group with the means to add long-term value to shareholders.

View our latest analysis for Zhengzhou Coal Mining Machinery Group

How Quickly Is Zhengzhou Coal Mining Machinery Group Increasing Earnings Per Share?

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Zhengzhou Coal Mining Machinery Group's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 41%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Not all of Zhengzhou Coal Mining Machinery Group's revenue last year was 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 music to the ears of Zhengzhou Coal Mining Machinery Group shareholders is that EBIT margins have grown from 10% to 13% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

Fortunately, we've got access to analyst forecasts of Zhengzhou Coal Mining Machinery Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Zhengzhou Coal Mining Machinery Group Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Zhengzhou Coal Mining Machinery Group insiders have a significant amount of capital invested in the stock. Indeed, they hold CN¥204m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 0.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Zhengzhou Coal Mining Machinery Group Worth Keeping An Eye On?

Zhengzhou Coal Mining Machinery Group'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. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Zhengzhou Coal Mining Machinery Group very closely. It is worth noting though that we have found 1 warning sign for Zhengzhou Coal Mining Machinery Group that you need to take into consideration.

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.