If EPS Growth Is Important To You, Sinopec Oilfield Equipment (SZSE:000852) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Sinopec Oilfield Equipment (SZSE:000852). 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.

View our latest analysis for Sinopec Oilfield Equipment

How Fast Is Sinopec Oilfield Equipment Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Sinopec Oilfield Equipment has achieved impressive annual EPS growth of 54%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Our analysis has highlighted that Sinopec Oilfield Equipment's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Sinopec Oilfield Equipment achieved similar EBIT margins to last year, revenue grew by a solid 8.8% to CN¥8.4b. That's encouraging news for the company!

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.

Fortunately, we've got access to analyst forecasts of Sinopec Oilfield Equipment's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sinopec Oilfield Equipment 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. Our analysis has discovered that the median total compensation for the CEOs of companies like Sinopec Oilfield Equipment with market caps between CN¥2.9b and CN¥12b is about CN¥943k.

The Sinopec Oilfield Equipment CEO received CN¥777k in compensation for the year ending December 2022. 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. It can also be a sign of good governance, more generally.

Should You Add Sinopec Oilfield Equipment To Your Watchlist?

Sinopec Oilfield Equipment's earnings have taken off in quite an impressive fashion. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. Before you take the next step you should know about the 2 warning signs for Sinopec Oilfield Equipment (1 shouldn't be ignored!) that we have uncovered.

Although Sinopec Oilfield Equipment 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.