With EPS Growth And More, SAN BIAN SCIENCE& TECHNOLOGY (SZSE:002112) Makes An Interesting Case

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 SAN BIAN SCIENCE& TECHNOLOGY (SZSE:002112), 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 SAN BIAN SCIENCE& TECHNOLOGY

SAN BIAN SCIENCE& TECHNOLOGY's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that SAN BIAN SCIENCE& TECHNOLOGY's EPS has grown 24% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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 SAN BIAN SCIENCE& TECHNOLOGY's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for SAN BIAN SCIENCE& TECHNOLOGY remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 41% to CN¥1.5b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are SAN BIAN SCIENCE& TECHNOLOGY 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. SAN BIAN SCIENCE& TECHNOLOGY 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¥153m worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 6.9% of the company; visible skin in the game.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between CN¥1.4b and CN¥5.8b, like SAN BIAN SCIENCE& TECHNOLOGY, the median CEO pay is around CN¥836k.

The SAN BIAN SCIENCE& TECHNOLOGY CEO received CN¥692k in compensation for the year ending December 2022. 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 good governance, more generally.

Should You Add SAN BIAN SCIENCE& TECHNOLOGY To Your Watchlist?

You can't deny that SAN BIAN SCIENCE& TECHNOLOGY has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes SAN BIAN SCIENCE& TECHNOLOGY look rather interesting indeed. Before you take the next step you should know about the 2 warning signs for SAN BIAN SCIENCE& TECHNOLOGY that we have uncovered.

Although SAN BIAN SCIENCE& TECHNOLOGY certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have also seen recent insider buying..

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.