With EPS Growth And More, Wuhan Nusun Landscape (SZSE:300536) Makes An Interesting Case

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Wuhan Nusun Landscape (SZSE:300536). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Wuhan Nusun Landscape with the means to add long-term value to shareholders.

Check out our latest analysis for Wuhan Nusun Landscape

How Fast Is Wuhan Nusun Landscape Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Wuhan Nusun Landscape has managed to grow EPS by 21% per year over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

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. Unfortunately, Wuhan Nusun Landscape's revenue dropped 59% last year, but the silver lining is that EBIT margins improved from 1.4% to 20%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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 Wuhan Nusun Landscape's balance sheet strength, before getting too excited.

Are Wuhan Nusun Landscape 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. Shareholders will be pleased by the fact that insiders own Wuhan Nusun Landscape shares worth a considerable sum. As a matter of fact, their holding is valued at CN¥168m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 3.4%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

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. The median total compensation for CEOs of companies similar in size to Wuhan Nusun Landscape, with market caps between CN¥2.9b and CN¥12b, is around CN¥917k.

The Wuhan Nusun Landscape CEO received CN¥628k in compensation for the year ending 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 a culture of integrity, in a broader sense.

Does Wuhan Nusun Landscape Deserve A Spot On Your Watchlist?

For growth investors, Wuhan Nusun Landscape's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes Wuhan Nusun Landscape look rather interesting indeed. We don't want to rain on the parade too much, but we did also find 2 warning signs for Wuhan Nusun Landscape that you need to be mindful of.

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.