Does Nanjing LES Information Technology (SHSE:688631) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Nanjing LES Information Technology (SHSE:688631). 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.

See our latest analysis for Nanjing LES Information Technology

How Fast Is Nanjing LES Information Technology Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. It's good to see that Nanjing LES Information Technology's EPS has grown from CN¥0.68 to CN¥0.83 over twelve months. That's a 22% gain; respectable growth in the broader scheme of things.

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. Despite consistency in EBIT margins year on year, Nanjing LES Information Technology has actually recorded a dip in revenue. While this may raise concerns, investors should investigate the reasoning behind this.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Nanjing LES Information Technology.

Are Nanjing LES Information Technology Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Nanjing LES Information Technology, with market caps between CN¥7.3b and CN¥23b, is around CN¥1.2m.

Nanjing LES Information Technology offered total compensation worth CN¥1.1m to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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. It can also be a sign of a culture of integrity, in a broader sense.

Is Nanjing LES Information Technology Worth Keeping An Eye On?

As previously touched on, Nanjing LES Information Technology is a growing business, which is encouraging. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. All things considered, Nanjing LES Information Technology is definitely worth taking a deeper dive into. Even so, be aware that Nanjing LES Information Technology is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

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.