With EPS Growth And More, Himile Mechanical Science and Technology (Shandong) (SZSE:002595) Makes An Interesting Case

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Himile Mechanical Science and Technology (Shandong) (SZSE:002595). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Himile Mechanical Science and Technology (Shandong)

How Quickly Is Himile Mechanical Science and Technology (Shandong) Increasing Earnings Per Share?

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Himile Mechanical Science and Technology (Shandong) has grown EPS by 21% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Himile Mechanical Science and Technology (Shandong) maintained stable EBIT margins over the last year, all while growing revenue 15% to CN¥8.2b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Himile Mechanical Science and Technology (Shandong)'s future EPS 100% free.

Are Himile Mechanical Science and Technology (Shandong) 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 we're pleased to report that Himile Mechanical Science and Technology (Shandong) insiders own a meaningful share of the business. In fact, they own 57% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. At the current share price, that insider holding is worth a staggering CN¥22b. This is an incredible endorsement from them.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between CN¥29b and CN¥88b, like Himile Mechanical Science and Technology (Shandong), the median CEO pay is around CN¥1.8m.

Himile Mechanical Science and Technology (Shandong)'s CEO took home a total compensation package of CN¥918k in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Himile Mechanical Science and Technology (Shandong) Deserve A Spot On Your Watchlist?

For growth investors, Himile Mechanical Science and Technology (Shandong)'s raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Himile Mechanical Science and Technology (Shandong) has underlying strengths that make it worth a look at. However, before you get too excited we've discovered 1 warning sign for Himile Mechanical Science and Technology (Shandong) that you should be aware of.

Although Himile Mechanical Science and Technology (Shandong) 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.