If EPS Growth Is Important To You, Shantui Construction Machinery (SZSE:000680) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Shantui Construction Machinery (SZSE:000680), which has not only revenues, but also profits. 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 Shantui Construction Machinery

Shantui Construction Machinery's Improving Profits

In the last three years Shantui Construction Machinery's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Shantui Construction Machinery's EPS skyrocketed from CN¥0.35 to CN¥0.59, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 66%.

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. It's noted that Shantui Construction Machinery's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Shantui Construction Machinery is growing revenues, and EBIT margins improved by 3.8 percentage points to 7.4%, over the last year. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 Shantui Construction Machinery.

Are Shantui Construction Machinery Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shantui Construction Machinery followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have CN¥87m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Shantui Construction Machinery Worth Keeping An Eye On?

For growth investors, Shantui Construction Machinery's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Shantui Construction Machinery's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Before you take the next step you should know about the 1 warning sign for Shantui Construction Machinery that we have uncovered.

Although Shantui Construction Machinery 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.