Here's Why We Think Inner Mongolia Yili Industrial Group (SHSE:600887) Is Well Worth Watching

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. 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. 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.

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 Inner Mongolia Yili Industrial Group (SHSE:600887). 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.

Check out our latest analysis for Inner Mongolia Yili Industrial Group

How Quickly Is Inner Mongolia Yili Industrial Group Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Inner Mongolia Yili Industrial Group has grown EPS by 8.3% per year. That's a good rate of growth, if it can be sustained.

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. While Inner Mongolia Yili Industrial Group may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of 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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Inner Mongolia Yili Industrial Group's future profits.

Are Inner Mongolia Yili Industrial Group Insiders Aligned With All Shareholders?

Since Inner Mongolia Yili Industrial Group has a market capitalisation of CN¥181b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth CN¥13b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Is Inner Mongolia Yili Industrial Group Worth Keeping An Eye On?

One important encouraging feature of Inner Mongolia Yili Industrial Group is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Inner Mongolia Yili Industrial Group is trading on a high P/E or a low P/E, relative to its industry.

Although Inner Mongolia Yili 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.