Do Ningbo BaoSi Energy Equipment's (SZSE:300441) Earnings Warrant Your Attention?

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. 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.

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 Ningbo BaoSi Energy Equipment (SZSE:300441). 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.

View our latest analysis for Ningbo BaoSi Energy Equipment

Ningbo BaoSi Energy Equipment's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Ningbo BaoSi Energy Equipment's EPS went from CN¥0.23 to CN¥1.26 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Ningbo BaoSi Energy Equipment's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The music to the ears of Ningbo BaoSi Energy Equipment shareholders is that EBIT margins have grown from 13% to 18% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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

Are Ningbo BaoSi Energy Equipment Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Ningbo BaoSi Energy Equipment followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have CN¥217m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between CN¥2.9b and CN¥12b, like Ningbo BaoSi Energy Equipment, the median CEO pay is around CN¥979k.

Ningbo BaoSi Energy Equipment's CEO took home a total compensation package worth CN¥620k in the year leading up to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Ningbo BaoSi Energy Equipment To Your Watchlist?

Ningbo BaoSi Energy Equipment's earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so the writing on the wall tells us that Ningbo BaoSi Energy Equipment is worth considering carefully. You still need to take note of risks, for example - Ningbo BaoSi Energy Equipment has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

Although Ningbo BaoSi Energy Equipment 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.

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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.