We Ran A Stock Scan For Earnings Growth And Henan Senyuan Electric (SZSE:002358) Passed With Ease

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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Henan Senyuan Electric (SZSE:002358). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Henan Senyuan Electric

How Fast Is Henan Senyuan Electric Growing Its Earnings Per Share?

Henan Senyuan Electric has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Henan Senyuan Electric's EPS shot from CN¥0.07 to CN¥0.13, over the last year. Year on year growth of 80% is certainly a sight to behold.

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. The music to the ears of Henan Senyuan Electric shareholders is that EBIT margins have grown from 7.2% to 9.4% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Henan Senyuan Electric's balance sheet strength, before getting too excited.

Are Henan Senyuan Electric 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 Henan Senyuan Electric insiders have a significant amount of capital invested in the stock. To be specific, they have CN¥324m worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 6.8% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add Henan Senyuan Electric To Your Watchlist?

Henan Senyuan Electric'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 Henan Senyuan Electric very closely. You should always think about risks though. Case in point, we've spotted 1 warning sign for Henan Senyuan Electric you should be aware of.

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.