If EPS Growth Is Important To You, Zhejiang Risun Intelligent TechnologyLtd (SHSE:688215) Presents An Opportunity

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 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.

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 Risun Intelligent TechnologyLtd (SHSE:688215). 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.

Zhejiang Risun Intelligent TechnologyLtd's Earnings Per Share Are Growing

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. That means EPS growth is considered a real positive by most successful long-term investors. Zhejiang Risun Intelligent TechnologyLtd managed to grow EPS by 7.6% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Zhejiang Risun Intelligent TechnologyLtd'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. EBIT margins for Zhejiang Risun Intelligent TechnologyLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.7% to CN¥390m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Check out our latest analysis for Zhejiang Risun Intelligent TechnologyLtd

Since Zhejiang Risun Intelligent TechnologyLtd is no giant, with a market capitalisation of CN¥1.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Zhejiang Risun Intelligent TechnologyLtd 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 Risun Intelligent TechnologyLtd will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 43% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have CN¥550m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Zhejiang Risun Intelligent TechnologyLtd with market caps between CN¥726m and CN¥2.9b is about CN¥747k.

The Zhejiang Risun Intelligent TechnologyLtd CEO received total compensation of only CN¥330k in the year to December 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Zhejiang Risun Intelligent TechnologyLtd Worth Keeping An Eye On?

As previously touched on, Zhejiang Risun Intelligent TechnologyLtd is a growing business, which is encouraging. Earnings growth might be the main attraction for Zhejiang Risun Intelligent TechnologyLtd, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. However, before you get too excited we've discovered 1 warning sign for Zhejiang Risun Intelligent TechnologyLtd that you should be aware of.

Although Zhejiang Risun Intelligent TechnologyLtd 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.

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

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.