If EPS Growth Is Important To You, Xueda (Xiamen) Education Technology Group (SZSE:000526) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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.

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 Xueda (Xiamen) Education Technology Group (SZSE:000526). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Xueda (Xiamen) Education Technology Group with the means to add long-term value to shareholders.

View our latest analysis for Xueda (Xiamen) Education Technology Group

How Quickly Is Xueda (Xiamen) Education Technology Group Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Xueda (Xiamen) Education Technology Group's EPS has grown 35% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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, last year, Xueda (Xiamen) Education Technology Group's revenue from operations was lower than its revenue, so that could distort our analysis of its margins. Xueda (Xiamen) Education Technology Group shareholders can take confidence from the fact that EBIT margins are up from 6.4% to 12%, and revenue is growing. 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. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Xueda (Xiamen) Education Technology Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Xueda (Xiamen) Education Technology Group Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Xueda (Xiamen) Education Technology Group with market caps between CN¥2.9b and CN¥12b is about CN¥926k.

Xueda (Xiamen) Education Technology Group's CEO only received compensation totalling CN¥407k in the year to December 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.

Does Xueda (Xiamen) Education Technology Group Deserve A Spot On Your Watchlist?

For growth investors, Xueda (Xiamen) Education Technology Group's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. What about risks? Every company has them, and we've spotted 1 warning sign for Xueda (Xiamen) Education Technology Group you should know about.

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.