Do Zhejiang Zhongjian TechnologyLtd's (SZSE:002779) Earnings Warrant Your Attention?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Zhejiang Zhongjian TechnologyLtd (SZSE:002779). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Zhejiang Zhongjian TechnologyLtd

Zhejiang Zhongjian TechnologyLtd's Improving Profits

Over the last three years, Zhejiang Zhongjian TechnologyLtd 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. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Zhejiang Zhongjian TechnologyLtd's EPS grew from CN¥0.21 to CN¥0.35, over the previous 12 months. It's a rarity to see 71% year-on-year growth like that.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Zhejiang Zhongjian TechnologyLtd'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 Zhongjian TechnologyLtd is growing revenues, and EBIT margins improved by 2.9 percentage points to 5.4%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Zhejiang Zhongjian TechnologyLtd 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. So it is good to see that Zhejiang Zhongjian TechnologyLtd insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥1.4b. This totals to 33% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between CN¥2.9b and CN¥12b, like Zhejiang Zhongjian TechnologyLtd, the median CEO pay is around CN¥924k.

Zhejiang Zhongjian TechnologyLtd's CEO took home a total compensation package of CN¥450k in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.

Should You Add Zhejiang Zhongjian TechnologyLtd To Your Watchlist?

Zhejiang Zhongjian TechnologyLtd's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Zhejiang Zhongjian TechnologyLtd is certainly doing some things right and is well worth investigating. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Zhejiang Zhongjian TechnologyLtd shapes up to industry peers, when it comes to ROE.

Although Zhejiang Zhongjian TechnologyLtd 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.