Here's Why Zhejiang Cfmoto PowerLtd (SHSE:603129) Has Caught The Eye Of Investors

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 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 Zhejiang Cfmoto PowerLtd (SHSE:603129). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhejiang Cfmoto PowerLtd with the means to add long-term value to shareholders.

Check out our latest analysis for Zhejiang Cfmoto PowerLtd

How Fast Is Zhejiang Cfmoto PowerLtd Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Zhejiang Cfmoto PowerLtd has managed to grow EPS by 33% 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's noted that Zhejiang Cfmoto PowerLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Zhejiang Cfmoto PowerLtd is growing revenues, and EBIT margins improved by 2.3 percentage points to 8.2%, over the last year. That's great to see, on both counts.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Zhejiang Cfmoto PowerLtd's future EPS 100% free.

Are Zhejiang Cfmoto PowerLtd 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. Shareholders will be pleased by the fact that insiders own Zhejiang Cfmoto PowerLtd shares worth a considerable sum. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥735m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between CN¥14b and CN¥46b, like Zhejiang Cfmoto PowerLtd, the median CEO pay is around CN¥1.5m.

Zhejiang Cfmoto PowerLtd offered total compensation worth CN¥1.2m to its CEO in the year 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 a culture of integrity, in a broader sense.

Does Zhejiang Cfmoto PowerLtd Deserve A Spot On Your Watchlist?

You can't deny that Zhejiang Cfmoto PowerLtd has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Zhejiang Cfmoto PowerLtd look rather interesting indeed. We should say that we've discovered 2 warning signs for Zhejiang Cfmoto PowerLtd (1 is a bit concerning!) that you should be aware of before investing here.

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.