Is Now The Time To Put Ganyuan Foods (SZSE:002991) On Your Watchlist?

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Ganyuan Foods (SZSE:002991). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ganyuan Foods with the means to add long-term value to shareholders.

See our latest analysis for Ganyuan Foods

Ganyuan Foods' Earnings Per Share Are Growing

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. Ganyuan Foods' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 44%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. While we note Ganyuan Foods achieved similar EBIT margins to last year, revenue grew by a solid 19% to CN¥2.1b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Ganyuan Foods.

Are Ganyuan Foods Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Ganyuan Foods insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 63% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. And their holding is extremely valuable at the current share price, totalling CN¥4.6b. That level of investment from insiders is nothing to sneeze at.

Is Ganyuan Foods Worth Keeping An Eye On?

Ganyuan Foods' earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Ganyuan Foods for a spot on your watchlist. Even so, be aware that Ganyuan Foods is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Chinese companies which have demonstrated growth backed by significant insider holdings.

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.