Here's Why We Think Hangzhou Zhongtai Cryogenic Technology (SZSE:300435) Might Deserve Your Attention Today

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.

In contrast to all that, many investors prefer to focus on companies like Hangzhou Zhongtai Cryogenic Technology (SZSE:300435), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hangzhou Zhongtai Cryogenic Technology with the means to add long-term value to shareholders.

Check out our latest analysis for Hangzhou Zhongtai Cryogenic Technology

How Fast Is Hangzhou Zhongtai Cryogenic Technology Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Hangzhou Zhongtai Cryogenic Technology has managed to grow EPS by 23% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It was a year of stability for Hangzhou Zhongtai Cryogenic Technology as both revenue and EBIT margins remained have been flat over the past year. That's not a major concern but nor does it point to the long term growth we like to see.

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 it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Hangzhou Zhongtai Cryogenic Technology's balance sheet strength, before getting too excited.

Are Hangzhou Zhongtai Cryogenic Technology 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. Shareholders will be pleased by the fact that insiders own Hangzhou Zhongtai Cryogenic Technology shares worth a considerable sum. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥835m. That equates to 16% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

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. The median total compensation for CEOs of companies similar in size to Hangzhou Zhongtai Cryogenic Technology, with market caps between CN¥2.9b and CN¥12b, is around CN¥951k.

Hangzhou Zhongtai Cryogenic Technology's CEO took home a total compensation package worth CN¥716k in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.

Is Hangzhou Zhongtai Cryogenic Technology Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Hangzhou Zhongtai Cryogenic Technology's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the key takeaway is that Hangzhou Zhongtai Cryogenic Technology is worth keeping an eye on. Even so, be aware that Hangzhou Zhongtai Cryogenic Technology is showing 1 warning sign in our investment analysis , you should know about...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Chinese companies which have demonstrated growth backed by recent insider purchases.

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.