Is Now The Time To Put Shijiazhuang Tonhe Electronics TechnologiesLtd (SZSE:300491) On Your Watchlist?

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.

In contrast to all that, many investors prefer to focus on companies like Shijiazhuang Tonhe Electronics TechnologiesLtd (SZSE:300491), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Shijiazhuang Tonhe Electronics TechnologiesLtd

Shijiazhuang Tonhe Electronics TechnologiesLtd's Improving Profits

Shijiazhuang Tonhe Electronics TechnologiesLtd has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Impressively, Shijiazhuang Tonhe Electronics TechnologiesLtd's EPS catapulted from CN¥0.24 to CN¥0.52, over the last year. Year on year growth of 114% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. EBIT margins for Shijiazhuang Tonhe Electronics TechnologiesLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 49% to CN¥850m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Shijiazhuang Tonhe Electronics TechnologiesLtd's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Shijiazhuang Tonhe Electronics TechnologiesLtd Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Shijiazhuang Tonhe Electronics TechnologiesLtd will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 45% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at CN¥1.4b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Shijiazhuang Tonhe Electronics TechnologiesLtd, with market caps between CN¥1.4b and CN¥5.8b, is around CN¥836k.

The Shijiazhuang Tonhe Electronics TechnologiesLtd CEO received CN¥607k in compensation for the year ending December 2022. That is actually below the median for CEO's of similarly 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 a culture of integrity, in a broader sense.

Is Shijiazhuang Tonhe Electronics TechnologiesLtd Worth Keeping An Eye On?

Shijiazhuang Tonhe Electronics TechnologiesLtd's earnings per share have been soaring, with growth rates sky high. 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 drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that Shijiazhuang Tonhe Electronics TechnologiesLtd is worth considering carefully. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Shijiazhuang Tonhe Electronics TechnologiesLtd (at least 1 which is significant) , and understanding them should be part of your investment process.

Although Shijiazhuang Tonhe Electronics TechnologiesLtd 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.