If EPS Growth Is Important To You, Gansu Yasheng Industrial (Group) (SHSE:600108) Presents An Opportunity

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Gansu Yasheng Industrial (Group) (SHSE:600108). 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 Gansu Yasheng Industrial (Group)

How Fast Is Gansu Yasheng Industrial (Group) Growing Its Earnings Per Share?

Over the last three years, Gansu Yasheng Industrial (Group) 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. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Gansu Yasheng Industrial (Group)'s EPS has grown from CN¥0.041 to CN¥0.048 over twelve months. There's little doubt shareholders would be happy with that 17% gain.

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. Gansu Yasheng Industrial (Group) maintained stable EBIT margins over the last year, all while growing revenue 8.0% to CN¥4.0b. That's progress.

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 Gansu Yasheng Industrial (Group)'s balance sheet strength, before getting too excited.

Are Gansu Yasheng Industrial (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 Gansu Yasheng Industrial (Group) with market caps between CN¥2.9b and CN¥12b is about CN¥964k.

The Gansu Yasheng Industrial (Group) CEO received total compensation of only CN¥24k in the year to December 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. It can also be a sign of good governance, more generally.

Does Gansu Yasheng Industrial (Group) Deserve A Spot On Your Watchlist?

One important encouraging feature of Gansu Yasheng Industrial (Group) is that it is growing profits. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So based on its merits, the stock deserves further research, if not an addition to your watchlist. You still need to take note of risks, for example - Gansu Yasheng Industrial (Group) has 2 warning signs (and 1 which is significant) we think you should know about.

Although Gansu Yasheng Industrial (Group) 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.