Do Changbai Mountain Tourism's (SHSE:603099) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

In contrast to all that, many investors prefer to focus on companies like Changbai Mountain Tourism (SHSE:603099), 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 Changbai Mountain Tourism

Changbai Mountain Tourism's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Changbai Mountain Tourism's EPS went from CN¥0.11 to CN¥0.55 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. Could this be a sign that the business has reached an inflection point?

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. Changbai Mountain Tourism shareholders can take confidence from the fact that EBIT margins are up from 3.2% to 29%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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 Changbai Mountain Tourism.

Are Changbai Mountain Tourism Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Changbai Mountain Tourism, with market caps between CN¥2.8b and CN¥11b, is around CN¥1.0m.

Changbai Mountain Tourism offered total compensation worth CN¥526k to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Changbai Mountain Tourism To Your Watchlist?

Changbai Mountain Tourism's earnings per share growth have been climbing higher at an appreciable rate. This appreciable increase in earnings could be a sign of an upward trajectory for the company. What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. So Changbai Mountain Tourism looks like it could be a good quality growth stock, at first glance. That's worth watching. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Changbai Mountain Tourism shapes up to industry peers, when it comes to ROE.

Although Changbai Mountain Tourism 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.