Anhui Province Natural Gas DevelopmentCo.Ltd (SHSE:603689) Ticks All The Boxes When It Comes To Earnings Growth

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.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Anhui Province Natural Gas DevelopmentCo.Ltd (SHSE:603689), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Anhui Province Natural Gas DevelopmentCo.Ltd

How Fast Is Anhui Province Natural Gas DevelopmentCo.Ltd Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Anhui Province Natural Gas DevelopmentCo.Ltd managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Despite consistency in EBIT margins year on year, Anhui Province Natural Gas DevelopmentCo.Ltd has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Anhui Province Natural Gas DevelopmentCo.Ltd's balance sheet strength, before getting too excited.

Are Anhui Province Natural Gas DevelopmentCo.Ltd Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. For companies with market capitalisations between CN¥1.4b and CN¥5.6b, like Anhui Province Natural Gas DevelopmentCo.Ltd, the median CEO pay is around CN¥941k.

Anhui Province Natural Gas DevelopmentCo.Ltd offered total compensation worth CN¥721k to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Anhui Province Natural Gas DevelopmentCo.Ltd Worth Keeping An Eye On?

As previously touched on, Anhui Province Natural Gas DevelopmentCo.Ltd is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. All things considered, Anhui Province Natural Gas DevelopmentCo.Ltd is definitely worth taking a deeper dive into. We don't want to rain on the parade too much, but we did also find 2 warning signs for Anhui Province Natural Gas DevelopmentCo.Ltd that you need to be mindful of.

Although Anhui Province Natural Gas DevelopmentCo.Ltd 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.