With EPS Growth And More, Guangdong TCL Smart Home Appliances (SZSE:002668) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Guangdong TCL Smart Home Appliances (SZSE:002668), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Guangdong TCL Smart Home Appliances with the means to add long-term value to shareholders.

Check out our latest analysis for Guangdong TCL Smart Home Appliances

How Fast Is Guangdong TCL Smart Home Appliances Growing Its Earnings Per Share?

Over the last three years, Guangdong TCL Smart Home Appliances has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Guangdong TCL Smart Home Appliances' EPS soared from CN¥0.72 to CN¥0.90, over the last year. That's a fantastic gain of 26%.

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. EBIT margins for Guangdong TCL Smart Home Appliances remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.1% to CN¥18b. 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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Guangdong TCL Smart Home Appliances.

Are Guangdong TCL Smart Home Appliances 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 Guangdong TCL Smart Home Appliances shares worth a considerable sum. As a matter of fact, their holding is valued at CN¥171m. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Guangdong TCL Smart Home Appliances Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Guangdong TCL Smart Home Appliances' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Guangdong TCL Smart Home Appliances' continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Of course, just because Guangdong TCL Smart Home Appliances is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.

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.