Here's Why We Think Wuchan Zhongda GeronLtd (SZSE:002722) Is Well Worth Watching

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Wuchan Zhongda GeronLtd (SZSE:002722). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Wuchan Zhongda GeronLtd with the means to add long-term value to shareholders.

See our latest analysis for Wuchan Zhongda GeronLtd

How Quickly Is Wuchan Zhongda GeronLtd Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Wuchan Zhongda GeronLtd has managed to grow EPS by 24% per year 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. Our analysis has highlighted that Wuchan Zhongda GeronLtd's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Despite consistency in EBIT margins year on year, Wuchan Zhongda GeronLtd has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are Wuchan Zhongda GeronLtd Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Wuchan Zhongda GeronLtd insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at CN¥143m. That's a lot of money, and no small incentive to work hard. Even though that's only about 4.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Wuchan Zhongda GeronLtd To Your Watchlist?

You can't deny that Wuchan Zhongda GeronLtd has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. 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. We should say that we've discovered 1 warning sign for Wuchan Zhongda GeronLtd that you should be aware of before investing here.

Although Wuchan Zhongda GeronLtd 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.