Should You Be Adding Shanxi Xinghuacun Fen Wine FactoryLtd (SHSE:600809) To Your Watchlist Today?

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 Shanxi Xinghuacun Fen Wine FactoryLtd (SHSE:600809), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shanxi Xinghuacun Fen Wine FactoryLtd with the means to add long-term value to shareholders.

Check out our latest analysis for Shanxi Xinghuacun Fen Wine FactoryLtd

How Quickly Is Shanxi Xinghuacun Fen Wine FactoryLtd Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Shanxi Xinghuacun Fen Wine FactoryLtd has grown EPS by 43% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. The good news is that Shanxi Xinghuacun Fen Wine FactoryLtd is growing revenues, and EBIT margins improved by 2.8 percentage points to 45%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Shanxi Xinghuacun Fen Wine FactoryLtd's forecast profits?

Are Shanxi Xinghuacun Fen Wine FactoryLtd Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥322b company like Shanxi Xinghuacun Fen Wine FactoryLtd. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they hold CN¥89m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.03%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Shanxi Xinghuacun Fen Wine FactoryLtd, with market caps over CN¥58b, is around CN¥2.6m.

Shanxi Xinghuacun Fen Wine FactoryLtd's CEO took home a total compensation package of CN¥975k in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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 a culture of integrity, in a broader sense.

Is Shanxi Xinghuacun Fen Wine FactoryLtd Worth Keeping An Eye On?

Shanxi Xinghuacun Fen Wine FactoryLtd's earnings per share growth have been climbing higher at an appreciable rate. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Shanxi Xinghuacun Fen Wine FactoryLtd certainly ticks a few boxes, so we think it's probably well worth further consideration. We don't want to rain on the parade too much, but we did also find 1 warning sign for Shanxi Xinghuacun Fen Wine FactoryLtd that you need to be mindful of.

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.