If EPS Growth Is Important To You, Xiamen R&T Plumbing TechnologyLtd (SZSE:002790) Presents An Opportunity

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 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Xiamen R&T Plumbing TechnologyLtd (SZSE:002790). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Xiamen R&T Plumbing TechnologyLtd

Xiamen R&T Plumbing TechnologyLtd'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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Xiamen R&T Plumbing TechnologyLtd has managed to grow EPS by 24% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Xiamen R&T Plumbing TechnologyLtd shareholders can take confidence from the fact that EBIT margins are up from 8.5% to 12%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Xiamen R&T Plumbing TechnologyLtd's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Xiamen R&T Plumbing TechnologyLtd 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 those who are interested in Xiamen R&T Plumbing TechnologyLtd will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 66% of the company, so their decisions have a significant impact on their investments. 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. CN¥3.2b 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. Our analysis has discovered that the median total compensation for the CEOs of companies like Xiamen R&T Plumbing TechnologyLtd with market caps between CN¥2.9b and CN¥12b is about CN¥942k.

The Xiamen R&T Plumbing TechnologyLtd CEO received CN¥760k in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Xiamen R&T Plumbing TechnologyLtd Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Xiamen R&T Plumbing TechnologyLtd's strong EPS growth. 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 Xiamen R&T Plumbing TechnologyLtd look rather interesting indeed. You should always think about risks though. Case in point, we've spotted 1 warning sign for Xiamen R&T Plumbing TechnologyLtd you should be aware of.

Although Xiamen R&T Plumbing TechnologyLtd 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.