With EPS Growth And More, Gree Electric Appliances of Zhuhai (SZSE:000651) 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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Gree Electric Appliances of Zhuhai (SZSE:000651), which has not only revenues, but also profits. 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.

See our latest analysis for Gree Electric Appliances of Zhuhai

How Fast Is Gree Electric Appliances of Zhuhai 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. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Gree Electric Appliances of Zhuhai has grown EPS by 10.0% per year. That's a good rate of growth, if it can be sustained.

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. Our analysis has highlighted that Gree Electric Appliances of Zhuhai's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Gree Electric Appliances of Zhuhai maintained stable EBIT margins over the last year, all while growing revenue 8.3% to CN¥205b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. 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 Gree Electric Appliances of Zhuhai's future EPS 100% free.

Are Gree Electric Appliances of Zhuhai Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥223b company like Gree Electric Appliances of Zhuhai. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth CN¥2.6b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Gree Electric Appliances of Zhuhai To Your Watchlist?

As previously touched on, Gree Electric Appliances of Zhuhai is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Gree Electric Appliances of Zhuhai that you should be aware of.

Although Gree Electric Appliances of Zhuhai 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.